US Economy Surged 4.3% in Third Quarter

Happy Tuesday! Santa Claus delivered President Trump an early Christmas present today in the form of a blockbuster GDP report for the third quarter. (OK, it was actually the Commerce Department that delivered the report.) Still, economic concerns persist as evidenced by another report showing that consumer confidence slipped for the fifth straight month.

US Economy Surged 4.3% in Third Quarter, Fastest Pace in 2 Years

The U.S. economy grew at a surprisingly robust annualized pace of 4.3% in the third quarter of 2025, the Commerce Department announced Tuesday in a report that had been delayed by the government shutdown.

Driven by strong consumer spending, the growth - the highest in two years and a big jump from the 3.8% annualized rate recorded in the previous quarter - crushed expectations and indicates that the economy still has momentum despite a softening labor market and widespread concerns about tariff-driven inflation and a potential slowdown.

Consumer spending rose 3.5% on a quarterly basis, while business investment grew 2.8%. Spending on equipment was strong, up 5.4%, while defense spending grew 5.8%, helping to maintain overall government spending growth of 2.2%. Net exports played a key role, as well, contributing 1.6 percentage points to the total growth number.

Inflation also moved higher, with the personal consumption expenditures price index rising 3.4%, compared to 2.1% in the previous quarter. The core PCE index, which leaves out volatile food and fuel prices, rose 2.9%, compared to 2.6% the quarter before.

President Trump celebrated the report, saying that while most economists underestimated the growth numbers, "'TRUMP,' and some other Geniuses, got it right." Trump attributed the growth to "Good Government, and TARIFFS" while falsely claiming that "there is NO INFLATION!"

What the analysts are saying: Heather Long, chief economist at Navy Federal Credit Union, noted that trade played an unusually large role in the GDP report, with "artificially" high exports and low imports making GDP growth look stronger than it would have been otherwise.

Still, even without the distorting influence of the trade data, consumption was strong in the third quarter and overall growth was solid. "This [is] a ~2.5% to ~3% economy right now," Long wrote. Ongoing growth, though, "depends a lot on Americans keeping their jobs and layoffs not picking up."

Diane Swonk, chief economist at KPMG, highlighted the contrast between solid growth numbers and weak employment growth. "Employment rose by 160,000 jobs over the six months between April and September of this year," she wrote in a research note. "That contrasts with employment gains of 1.5 million in the back half of 2023."

Even without strong job growth, the economy appears to be stronger than some analysts had thought, with a solid outlook for 2026. "If the economy keeps producing at this level, then there isn't as much need to worry about a slowing economy," said Chris Zaccarelli, chief investment officer for Northlight Asset Management, per the Associated Press.

A 'Holiday Gift' From the Trump Administration to Drugmakers

President Trump last week announced deals with nine drug companies to lower the cost of medications sold in the United States. That same day, his administration proposed updates to regulations meant to increase transparency in healthcare pricing - and delivered what Bob Herman of STAT News calls a "holiday gift" the drug manufacturers and pharmacy benefit managers: "They still will not have to publicly post the actual prices of prescription drugs, more than five years after federal law required them to do so."

As Herman reports, the proposed new rule from the Trump administration represents another deferral of transparency requirements in place since 2020 and means that valuable data on the net prices drugmakers get for their products "will likely remain locked out of public view for the foreseeable future."

At the same time, the administration is also proposing a pair of five-year Medicare pilot programs that could reduce spending on prescription drugs by billions of dollars by requiring pharmaceutical companies to provide rebates for certain drugs under Medicare Part B and Part D if the prices exceed those of an international benchmark based on 19 "economically comparable" countries.

Read more about the administration's proposed transparency rule at Fierce Healthcare.

Number of the Day: 7.6 Million

The Wall Street Journal reports that America's seniors are overmedicated, often dangerously so. A Journal analysis of Medicare data found that about one in six of the 46 million seniors covered by Medicare's prescription drug benefit were prescribed at least eight medications - that's 7.6 million seniors who were simultaneously prescribed eight or more drugs for at least 90 days in 2022. Of those seniors, 3.9 million took 10 or more medications at once and more than 400,000 were prescribed 15 or more drugs at the same time.

Fiscal News Roundup

• **Resilient US Consumers Drive Strongest Economic Expansion in 2 Years** – Associated Press
• **U.S. Economy Surprises With 4.3% Growth Rate in Third Quarter** – Axios
• **Trump Lauds Strong GDP but Pans Market's Reaction to It** – The Hill
• **Consumer Confidence Slides in December as Bad Vibes About the Economy Persist** – Yahoo Finance
• **Shoppers Spent Big This Holiday Season, Despite Economic Pressures** – New York Times
• **Fed Should Lower Rates If the Market Does Well, Trump Says** – Bloomberg
• **Fed Chair Candidate Hassett Says U.S. Is Way Behind the Curve on Lowering Interest Rates** – CNBC
• **Trump Administration to Start Seizing Pay of Defaulted Student Loan Borrowers in January** – CNBC
• '**Incredibly Reckless': Trump's Wind Halt Stuns Even Some Allies** – Politico
• **Medicare's Prior Authorization Has Doctors on Edge** – Axios
• **Wall Street Journal Knocks Romney's 'Tax the Rich' Proposal** – The Hill
• **Trump's New 'Trump-Class' Battleship Will Carry Nuclear Weapons** – Politico
• **These 3 Republican Senators Are Giving John Thune Headaches** – Politico
• **Rand Paul's 'Festivus' Report Calls Out Cocaine Dogs, COVID Influencers and a Mountain of Debt** – Fox News

Views and Analysis

• **How Did DOGE Disrupt So Much While Saving So Little?** – Emily Badger, David A. Fahrenthold, Alicia Parlapiano and Margot Sanger-Katz, New York Times
• **3 Theories of What's Going On With the Contradictory Economic Data** – Jason Furman, New York Times
• **ACA Subsidies Are Expiring. Here's Who the Lapse Will Hit Hardest** – Greg Iacurci, CNBC
• **Here's What Happens Now That We're Going Over the Obamacare Cliff** – Grace Segers, New Republic
• **Congress Flees Town as Health Care Premiums Set to Explode for Millions of Americans in January** – Chad Pergram, Fox News
• **The Economic Collapse That Never Happened** – Zachary Karabell, Washington Post
• **The Year in Retail Summed Up in One Word: Tariffs** – Amanda Mull, Bloomberg Businessweek
• **The Year of the Tariff** – Jamieson Greer, Financial Times
• **5 Turning Points That Explain MAGA's Civil War** – Zachary Basu, Axios
• **How Kash Patel Ordered Himself a New Fleet of BMWs With FBI Money** – Malcolm Ferguson, New Republic
• **Why the Fed Strategically Absorbed Some Blows From Trump** – Andrew Ackerman, Washington Post
• '**America First' Agenda Must Include Tackling the Debt Crisis** – Brian Darling, The Hill
• **Fiscal Policy Is Raising Costs for American Families** – Dominik Lett, CATO Institute
• **4 Questions to Understand the Costs of 'Medical Freedom'** – Sarah Despres, STAT
• **What I Saw at a Maternity Ward in Kenya After the U.S. Cut Off Food and Foreign Aid** – Anna Maria Barry-Jester, ProPublica
• **Minnesota Paid Dearly for Saving $1 Million** – O.J. Oleka, Wall Street Journal