Q3 GDP at 4.3%? DIDN'T feel like a boom, and really doesn't today

After much delay, we got a GDP number that indicated a booming economy last Summer.

Real gross domestic product (GDP) increased at an annual rate of 4.3 percent in the third quarter of 2025 (July, August, and September), according to the initial estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent….

The increase in real GDP in the third quarter reflected increases in consumer spending, exports, and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The trade part is interesting, as I didn’t think exports would be up so much. But I suppose that is plausible, since the trade deficit did continue to decline in Q3, and imports were still going down in September (the last month reported). I was trying to figure out how consumer spending was up by so much in Q3, so I went back to the retail sales figures from this year, and I see that retail sales rallied between May and August, which raises the Q3 average quite a bit from a lower Q2 level.

But since August, retail sales and overall spending numbers haven’t been so good. This includes the updated income and spending figures that the BEA released on Wednesday along with the GDP numbers.

I’ll also note that personal saving has been dropping in every month since April, so consumers feeling comfortable enough to spend in this Summer may not reflect much for where they are feeling today.

We got more evidence of gloomy consumers at the end of 2025 on the same day the strong GDP numbers for Q3 were released.

The Conference Board said Tuesday that its consumer confidence index fell 3.8 points to 89.1 in December from November’s upwardly revised reading of 92.9. That is close to 85.7 reading in April, when Trump rolled out his import taxes on U.S. trading partners.

A measure of Americans’ short-term expectations for their income, business conditions and the job market remained stable at 70.7, but still well below 80, the marker that can signal a recession ahead. It was the 11th consecutive month that reading has come in under 80.

Consumers’ assessments of their current economic situation tumbled 9.5 points to 116.8…..

The conference board’s survey reported that 26.7% of consumers said jobs were “plentiful,” down from 28.2% in November. Also, 20.8% of consumers said jobs were “hard to get,” up from 20.1% last month.

I suppose it’s nice to know what was happening to fill in the blanks and figure out where we were coming from in September. But it’s also data from 3 months ago, and much of the data that we have seen indicates softening since then.

I also took notice of this part of the GDP report.

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $166.1 billion in the third quarter, compared with an increase of $6.8 billion in the second quarter.

This put the annual rate of pre-tax corporate profits over the $4 trillion threshold for the first time ever, and continued a sizable run of profit growth over the last few years.

I also recall that manufacturing has shed jobs while increasing output in each of the first 2 quarters of 2025, due to sizable increases in worker productivity. I want to see if the same trend holds for Q3 overall, since we’ve seen the jobs situation stay lame for those months despite the big jump in GDP.

The initial report of 4.3% GDP growth is an interesting data point, and helps us to bridge the gap between where we were in Spring and where we are today. But some of it feels a bit fluky and not sustainable, especially the boosts that trade and consumer spending gave for the last quarter. I’m not counting on that continuing for Q4.

I’ll also bring up that Q3 of 2007 was originally reported as 4.9% growth, with 2008 predicted to stay at 2% growth. It turned out the actual growth in Q3 2007 was 2.5% and 2008 is a year remembered for economic collapse. So file that away as 2025 ends, when we are allegedly in a period of continuing economic growth.