San Francisco, California — The U.S. economy accelerated significantly in the last quarter, with consumer spending rising sharply and exports rebounding. Economic growth for the three months ending in September reached an annualized rate of 4.3%, up from 3.8% the previous quarter, marking the strongest expansion in two years and exceeding many analysts’ predictions.

This recently released economic report, which was delayed due to the federal government shutdown, sheds light on the challenges and shifts the economy has faced, including new trade and immigration policies, persistent inflation, and reductions in government expenditure. Despite these hurdles, the economy has shown remarkable resilience, outperforming many forecasts and maintaining solid momentum.

Aditya Bhave, a senior economist at Bank of America, characterized this economic landscape as one that has defied widespread pessimism since early 2022. He noted that the economy’s ongoing strength suggests that this trend could continue. Bhave emphasized the robustness of consumer spending, which surged at an annual rate of 3.5% during the quarter, up from 2.5% previously, driven particularly by increased expenditures on healthcare services.

Imports have been on a downward trajectory, contributing negatively to growth, largely due to tariffs imposed on foreign goods by former President Donald Trump’s administration this spring. In contrast, exports experienced a significant increase, soaring by 7.4%. A rise in government spending was also notable, propelled by an uptick in defense expenditures.

While domestic economic activity showed strength, some sectors are countering these gains. Business investments have seen a slowdown, particularly in housing and intellectual property, as higher interest rates continue to strain affordability and constrain supply. Michael Pearce, chief U.S. economist at Oxford Economics, expressed optimism, stating that the economy is well-positioned for 2026, buoyed by recent tax cuts and the Federal Reserve’s move to lower interest rates.

However, rising prices pose a challenge to sustaining this growth. The Federal Reserve’s preferred inflation measure, the personal consumption expenditures price index, rose to 2.8% in the latest quarter, compared to 2.1% previously, indicating that inflation pressures remain, especially for lower- and middle-income households. Oliver Allen, a senior economist at Pantheon Macroeconomics, warned that recent trends in consumer spending data suggest households are starting to limit their expenditures.

As the economic landscape continues to evolve, maintaining balance amid rising costs and inflation will be critical. The divergent experiences of various income groups will likely shape spending patterns in the coming months as the economy navigates its path forward.