GDP Continued to Rise in Q3 — What That Means
Growth in the third quarter of 2025 registered at 4.3%.
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Real gross domestic product grew by an annual rate of 4.3% in the third quarter of 2025, according to the initial estimate report released on Dec. 23 by the Bureau of Economic Analysis.
The report was released later than expected due to the government shutdown and it replaces both the advance and second estimates.
GDP was negative in the first quarter of the year and rebounded to 3.8% in the second quarter.
The upturn in growth was largely due to an increase in consumer spending, as well as exports and government spending. Meanwhile, imports declined — that figure is subtracted in the GDP calculation.
Here’s what NerdWallet’s senior economist Elizabeth Renter had to say about Q3 GDP:
The economy continued to expand last quarter, with consumer spending leading the way. Despite their gloomy economic sentiment, people continue to spend. While sentiment can lead financial behaviors — bad feelings can drive reduced spending, for instance — the relationship between consumer feelings and behaviors has become less clear in recent years. Now is different from the “vibecession” of just a few years ago, however. Households are less insulated, as debt levels have risen, wage growth has slowed and the labor market isn’t exactly conducive to professional advancement. If consumers are using debt to continue spending, it could spell trouble should a job loss or other unanticipated financial shock hit. In the meantime, however, they’re fueling overall economic growth.
» MORE: Are we in a recession?
What is GDP?
GDP, or gross domestic product, is the market value — in current dollars — of all goods and services produced within the United States in a given period; Real GDP adjusts that measure for inflation. Changes in GDP are expressed on an annualized basis.
Does recent GDP data signal there is trouble ahead?
The third quarter growth increased at 4.3%, compared to 3.8% in Q2 and negative growth in the first quarter. Real gross domestic product decreased by an annual rate of 0.5% in the first quarter of 2025, according to the third estimate released on June 26 by the Bureau of Economic Analysis.
Negative growth, or contraction, is generally a red flag that there is a slowdown happening in the economy. It shows that consumers and businesses may be spending less. Two consecutive quarters without growth is the traditional definition of a recession.
The first quarter 2025 drop in GDP was largely due to a surge in imported goods as companies and consumers tried to get ahead of President Donald Trump’s tariffs. That said, imports aren’t produced in the U.S. so they aren’t counted in the same way as other GDP factors like household spending, exports and investments. It’s likely that the negative GDP in March reflected a technicality rather than a sign of distress in the economy.
While the faster rate of GDP growth in the second quarter is a positive development, it’s not a signal that the economy is entirely healthy either. The Q2 growth increase was largely due to a decline in imports (because businesses stockpiled goods during the first quarter) and a boost in consumer spending (likely to get ahead of tariffs). Since the U.S. economy hasn’t felt the impact of tariffs yet, it’s unclear where the economy is headed from here.
Fed projects 1.7% growth for 2025, lower than previous forecast
Recent GDP projections by the FOMC forecasts lower growth for 2025 (1.7%) compared to its December forecast (2.1%), according to the FOMC’s Summary of Economic Projections released after its meeting March18-19
In terms of how the Fed might respond to changes in growth, Federal Reserve Chair Jerome Powell said at an event on April 4, “Inflation is going to be moving up and growth is going to be slowing, but to me it's not clear at this time what the appropriate path for monetary policy would be. We're going to need to wait and see how this plays out before we can start to make those adjustments.”
GDP for the third quarter of 2025
The BEA’s initial estimate showed that the U.S. GDP grew faster in the third quarter of 2025 than it did in the first and second quarters.
In the third quarter — covering July, August and September — real GDP went up by 4.3%, the initial estimate shows.
Here’s how the economy grew in recent quarters:
- 3.8% annual rate of growth in Q2 2025.
- -0.5% annual rate of growth in Q1 2025
- 2.4% annual rate of growth in Q4 2024.
- 3.1% annual rate of growth in Q3 2024.
- 3% annual rate of growth in Q2 2024.
- 1.6% annual rate of growth in Q1 2024.
- 3.4% annual rate of growth in Q4 2023.
- 4.9% annual rate of growth in Q3 2023.
- 2.1% annual rate of growth in Q2 2023.
- 2.1% annual rate of growth in Q1 2023.
The next estimate will be released on Jan. 22.
How did GDP in 2024 compare to recent years?
In 2020, at the beginning of the COVID-19 pandemic, the annual rate of GDP dropped to levels far below even those during the Great Recession, federal data shows. By the end of 2020 and into 2021, GDP rebounded quickly. However, the first two quarters of 2022 showed signs of slowing down before a more robust finish at the end of the year. GDP continued its upward trajectory through 2023 and 2024.
In 2024, the U.S. GDP grew 2.8%, just slightly below the 2.9% increase in 2023. The 2024 increase was primarily due to growth in consumer spending, investment, government spending and exports. Imports, which subtract from GDP, also increased.
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What did people spend money on in Q3 2025?
- Within consumer spending, both goods and services rose. Services spending was led by health care, as well as international travel and professional — mainly legal — services. Goods spending was led by recreational goods and vehicles as well as other nondurable goods — mainly prescriptions.
- Imports declined, driven by a decrease in goods, led by nondurable consumer goods. The decline was only partly offset by an increase in services imports — primarily business services.
- Exports rose, largely due increases in both goods and services. The goods increase was led by capital goods (except automotive) and nondurable consumer goods; services exports were led by business services.
Photo by Justin Sullivan/ Getty Images News via Getty Images
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