Consumer spending impact: US economy clocks 4.4% growth in Q3; fastest pace in two years

Strong consumer spending lifted the US economy to its fastest growth rate in two years in the July–September quarter, even as job creation remained subdued and concerns over the cost of living persisted.America’s gross domestic product expanded at an annual rate of 4.4% in the third quarter, a slight upward revision from the earlier estimate of 4.3% and faster than the 3.8% growth recorded in the April–June period, according to data released by the Commerce Department on Thursday, AP reported.The latest reading marks the strongest quarterly performance since the third quarter of 2023, driven largely by robust household consumption.

Consumer spending, which accounts for about 70% of US economic output, grew at a healthy annual pace of 3.5%, the data showed.A sharp rise in exports alongside a decline in imports also contributed to the strong overall growth in the quarter, according to the government figures.The economy has shown resilience despite uncertainty linked to President Donald Trump’s policies, particularly the imposition of double-digit tariffs on imports from most countries.

Still, the strong headline growth has not translated into widespread public confidence. Many Americans remain unhappy with economic conditions, especially the high cost of living, even as spending stays firm.Economists point to a possible “K-shaped economy”, where higher-income households benefit from stock market gains and rising investments, while lower-income groups struggle with stagnant wages and elevated prices.The labour market, meanwhile, appears significantly weaker than overall economic growth suggests. Employers have added an average of just 28,000 jobs a month since March, far below the roughly 400,000 jobs created monthly during the 2021–23 post-pandemic hiring boom.Despite the slowdown in hiring, the unemployment rate remains low at 4.4%, indicating what economists describe as a “no-hire, no-fire” environment, with companies cautious about both expanding payrolls and laying off workers.