The United States (US) economy grew at an annually adjusted rate of 4.3% in the third quarter of the year, which is to be seen as a remarkable development especially the intensified global economic uncertainty.[i] Exceeding the previous quarter’s growth rate of 3.8% and significantly surpassing market expectations (which were approximately 3.2%) indicates that the US economy has gained strong momentum in the short term. This performance is of particular importance, given that it has occurred despite high inflation, tightened financial conditions, “sharp turns” in trade and immigration policies, and cuts in public spending.
This situation seems to further demonstrate that the consumption-led growth model, which is also one of the classic structural features of the US economy, is still valid. However, there are certain question marks, regarding the sustainability of this model. In fact, there are signs of a “slowdown” in the labor market, real income growth seems limited, and the “excess savings” accumulated during the pandemic are largely drained. Therefore, it is debatable whether the current increase in consumption can continue at the same pace in the medium and long term.
Also contributing to growth was the decline in imports and the solid recovery in exports. The policies of President Donald Trump which were announced around the spring of this year and had increased tariffs on imports, led to a drop in imports; and so, this had an upward effect on growth in national income estimations. Although the decline in imports technically boosts growth, its indirect effects on production capacity, supply chains and prices are not to be overlooked.
In contrast, the 7.4% rise in exports that had fallen sharply in the previous period, shows that the US economy is also respectfully supported by global demand. This recovery on exports is fragile, as it depends on the course trajectory of dollar, global growth expectations and relations with trading partners. Therefore, the contribution of foreign trade to growth should be closely monitored to see whether it will go beyond being conjunctural.
However, an increase in public spending based on defense spending may have limited effects on increasing productivity and welfare in the long term. Compared to infrastructure, education, or technology investments, defense spending has a lower multiplier effect. Thus, although the contribution of public spending to growth appears positive in the short term, it has a limited impact in terms of structural transformation.
Despite strong growth performance, the slowdown in private sector investment is noteworthy. The stagnation in business investment, including intellectual property investment, indicates that companies are cautious about their future expectations. High interest rates are limiting investment appetite by increasing financing costs.
Similarly, the housing market is also under pressure from high interest rates. High lending rates reduce housing affordability, while supply constraints and cost increases deepen the market stagnation. This situation leads to imbalances in the composition of growth and causes domestic demand to become overly dependent on certain items.
In terms of the sustainability of growth, one of the most critical issues is the return of inflation to higher levels. The personal consumption expenditures (PCE) price index, which is also “the” inflation indicator preferred by the US Federal Reserve (FED), rose to 2.8% in the third quarter. This increase indicates a clear acceleration compared to the previous quarter’s level of 2.1%.[ii]
The strong growth performance achieved in the third quarter also presents a complex picture for the FED’s monetary policy. Although the economic growth exceeding expectations has postponed recession concerns in the short term, the renewed rise in inflation indicators requires the FED to be cautious about interest rate cuts. In particular, the rise of the personal consumption expenditure (PCE) price index to 2.8% indicates that early easing of monetary policy could be risky in terms of price stability.
Within this context, the fragile balance between growth and inflation stands out as one of the most significant challenges facing the US economy in the coming period. Keeping interest rates high for an extended period increases pressure on investment and the housing market, while early and rapid interest rate cuts could lead to inflationary pressures becoming permanent. Therefore, the current growth performance offers the FED a limited room for action, creating a difficult choice between economic vitality and price stability.
Although official growth figures show that the US economy is resilient, the social base of this growth remains increasingly narrow. While high-income groups continue to spend, keeping consumption data strong, low and middle-income households are beginning to cut back on spending due to rising living costs, a weakening labor market, and stagnant real incomes. Credit card debt and consumer surveys also support this trend.
This situation highlights the limitations of the so-called “durable economy” narrative. Strong economic growth in numerical terms cannot be interpreted as meaning that social welfare has increased equally. Instead, the concentration of growth around specific sectors and income groups may increase the risk of demand contraction and political dissatisfaction in the future. Therefore, third-quarter growth should be evaluated not only as a macroeconomic success but also as a process that needs to be tested in terms of social sustainability.
In conclusion, the strong growth performance of the US economy in the third quarter can be interpreted as a sign of resilience and flexibility in the short term. However, the consumption growth, public spending, and foreign trade dynamics underlying this growth harbor various risks in the medium term. Inflationary pressures, income inequality, and weaknesses in the investment and housing markets call into question the sustainability of this growth. In this context, while the current growth figures are an indicator of success, it can be said that a lasting transformation that eliminates the structural problems of the US economy has not yet taken place.
[i] Sherman, Natalie. “US Economy Grows at Fastest Pace in Two Years”, BBC News, www.bbc.com/news/articles/c62n9ynzrdpo, (Access Date: 28.12.2025).
[ii] ibid.
