- A new federal report shows the U.S. economy grew by 4.3% in the third quarter.
- The growth rate, driven mostly by an uptick in consumer spending, surprised most economists.
- Wealthy Americans currently account for an outsize portion of new spending.
A delayed Commerce Department report released Tuesday shows U.S. economic growth outpaced expectations in the third quarter of the year, hitting the highest growth rate in two years.
U.S. gross domestic product, a measure that captures the total value of goods and services produced in a specified time period, grew by 4.3% in the July-September period, according to the report, easily surpassing the 3.2% quarterly growth rate most economists were expecting.
The primary driver of third quarter growth, per the report, was consumer spending, which rose 3.5% over the period, well ahead of the second quarter’s 2.5% uptick. Export volumes and government spending also helped push the GDP measure higher and corporate profits shot up by $166.1 billion, or 4.2%, compared with a gain of $6.8 billion in the second quarter, according to the new Commerce Department data.
While the surprise economic growth spurt is a positive measure of how the U.S. economy is functioning, the report includes a less cheery inflation rate with average prices on consumer goods and services up 2.8% over the three-month period, jumping from the second quarter’s 2.1% rate.
In a Truth Social posting Tuesday, President Donald Trump said the third quarter uptick was a result of his administration’s trade policy changes. The president also discounted current inflationary pressures.
“The SUCCESS is due to Good Government, and TARIFFS,” Trump wrote. “Consumer spending is STRONG, Net Exports are WAY UP, Imports and Trade Deficits are WAY DOWN, and there is NO INFLATION!”
Why are gas prices down?
While multiple reports have confirmed broad consumer price increases over the past year, one bright spot for family budgets in the midst of the holiday travel season is the cost of gasoline.
Across the U.S. the average price of a gallon of regular was $2.86 on Tuesday, down from $2.91 a week ago and the $3.04 per gallon this time last year, according to AAA data.
Industry watchers say the declining price trend could cross over into early 2026 as petroleum supplies continue to outstrip demand.
“For a fourth straight week, the national average price of gasoline has declined, as conditions remain ripe for some of the lowest seasonal gas prices in five years,” wrote Patrick De Haan, head of petroleum analysis at GasBuddy in a Monday blog post.
“Oil prices continue to struggle amid rising U.S., Canadian, and OPEC+ oil production, while refinery output remains near some of the highest seasonal levels in years — factors that are likely to keep gas prices under pressure over the weeks ahead. We’re continuing to see some gas prices below $2 per gallon in the nation’s cheapest states, now at more than 125 gas stations."
The caveat to consumer spending
Consumer spending drives an outsize portion of the U.S. economy, accounting for some two-thirds of overall GDP. And it’s reflected in Tuesday’s report with the uptick in consumer spending the main factor behind the third quarter’s GDP growth.
But economists have been highlighting that a closer look at the demographics of consumer spending reveals a profound division has emerged in which wealthier Americans are in solid economic stead while lower income households are on budget watch amid rising costs.
That dynamic, identified as the K-shaped economy, represents a broader separation of the haves and have-nots in the current economic climate, where higher income Americans, represented in the upper arm of the K, are prospering as their wealth, vested largely in the stock and real estate holdings, is on the rise. Most U.S. households, however, are tracking with the downward K arm as inflation, rising housing costs and slowing wage growth pushes lower level earners into more dire economic straits.
In a recent Deseret News breakdown of the workings of the K-shaped economy, Mark Zandi, chief economist for Moody’s Analytics, identified the household income line separating those in the upper and lower arms of the K-shaped economy as roughly $175,000.
If your earnings are over that threshold, as are around 20% of U.S. households, your fiscal health is likely solid and moving in a positive direction. But the 80% of households that fall under that figure are facing diminishing prospects and more serious challenges amid the current economy.