The U.S. economy grew at a robust 4.3% annual pace in the third quarter, marking the strongest growth in two years, according to new government data released Tuesday.

The growth in gross domestic product — the nation's output of goods and services — between July and September far outstripped the forecast for 3% growth, according to economists polled by financial data firm FactSet. The latest figure, released by the Commerce Department, also reflects a healthy jump from the second quarter's annualized growth of 3.8%.

An acceleration in consumer spending, along with an upswing in exports and government outlays, helped propel economic growth in the third quarter, the Commerce Department said. Despite widespread public concerns about the economy, consumers are continuing to open their wallets, government data shows.

"While worries surrounding the jobs market, tariffs and inflation continue to swirl, the economy continues to defy its doubters by chugging higher," said Bret Kenwell, U.S. investment and options analyst at eToro, in an email. 

Exports grew at an 8.8% rate, while imports, which subtract from GDP, fell another 4.7%.

Inflation ticks higher

Although GDP growth was surprisingly strong, inflation ticked higher from the previous quarter. Tuesday's data shows that the personal consumption expenditures (PCE) index, a key barometer of inflation and consumer spending, rose at a 2.8% annual pace in the third quarter, compared with 2.1% between April and June. 

Core PCE, which excludes the more volatile food and energy categories, grew 2.9%, up from 2.6% in the previous quarter. Both are above the Federal Reserve's annual inflation target of 2%.

The economy has shown resilience this year. While inflation remains higher than the Fed would like, consumer prices have not risen as much as many economists initially feared after President Trump unveiled tariffs earlier this year. Some retailers have cushioned the blow for shoppers by absorbing the added costs, while others have passed them on through higher prices.

The labor market remains a weak spot, with employment numbers showing a slowdown in hiring during the second half of 2025. In November, the unemployment rate rose to 4.6%, the highest since 2021.

Will the momentum last?

Economists expect GDP growth to slow in the fourth quarter, citing the impact of the 43-day government shutdown. 

Paul Ashworth, chief North America economist at investment advisory firm Capital Economics, expects the economy to grow at an annual rate of roughly 2% in the final three months of the year. 

Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics, also thinks economic activity is likely to slow next quarter, describing the pace of growth in the third quarter as "broad but unsustainable."

"Even if revisions show that GDP grew by a bit less in 2025 than the latest numbers suggest, growth genuinely seems to have been supported by continued resilience among consumers and the boom in AI capex," he said in a research note. "We see clear signs, however, that the tide has turned in Q4, especially in consumption. "