U.S. GDP Climbs 4.3% in Q3 — Biggest Gain in Two Years; Shutdown Clouds Outlook

The U.S. economy expanded at a brisk 4.3% annualized rate in the third quarter, marking the largest quarterly gain in two years. The advance, reported in official GDP data, underscores a period of stronger activity that outpaced many forecasts and provided a welcome boost to growth metrics.

While the 4.3% pace signals robust momentum during Q3, economists caution that the strength may not persist. Analysts point to a looming drag from a prolonged federal government shutdown, which is expected to weigh on activity in the waning months of 2025. A shutdown can reduce federal outlays, interrupt contract work, and restrict services—factors that typically subtract from headline GDP growth when they persist.

Beyond the shutdown risk, forecasters will be watching consumer spending, business investment and trade flows for signs the recovery is broad-based. Historically, consumer expenditures and capital investment are primary contributors to quarterly gains; if those drivers soften, the quarterly growth rate could decelerate sharply. Labor-market conditions and inflation trends will also influence the trajectory, as tighter labor markets can sustain spending while higher inflation can erode purchasing power.

Policymakers and market participants will parse upcoming monthly indicators and revisions to existing data to gauge how much of the Q3 strength reflects durable improvement versus transitory factors such as inventory adjustments or short-term stimulus. Monetary and fiscal policy responses may shift if growth outlooks deteriorate materially due to the shutdown or other shocks.

For businesses and investors, the immediate implication is a reminder that headline GDP prints can mask near-term volatility. The Q3 upside strengthens the case that the economy retains resilience, but the potential economic drag from political impasses — like an extended shutdown — highlights downside risks. Observers will watch government funding developments closely, since any prolonged lapse in appropriations could trim growth late in the year and into early 2026.

Source: MarketWatch Top Stories.