US Growth Came in Hot in Q3 — But the Inflation Hangover Isn’t Gone

The New York Times, Reuters, CNBC, Politico, AP, the Washington Post contributed to this report.

The US economy didn’t just keep moving in the third quarter — it hit the gas.

A long-delayed Commerce Department report released Tuesday showed GDP grew at a 4.3% annual rate from July through September, well above what economists expected. This was supposed to land back on Oct. 30, but the government shutdown pushed it into late December — meaning Wall Street mostly shrugged, because the numbers are already “old news.” Still, the report offers a pretty loud snapshot of what powered the economy in late summer: consumers spending like they meant it.

The biggest engine was household demand. Consumer spending jumped 3.5%, up from 2.5% the quarter before. That’s the kind of acceleration that tells you Americans — or at least a large chunk of them — were still willing to buy, travel, and swipe the card despite the constant drumbeat about high prices.

The report also showed boosts from exports and government spending, and even though private fixed investment dipped, it wasn’t the kind of collapse that would sink the whole growth story.

A key “core” measure the Fed watches closely — real final sales to private domestic purchasers — rose 3%, a small step up from the previous quarter and a signal that underlying demand didn’t melt away.

Here’s the catch: the economy grew fast, but the inflation gauges heated up too.

The personal consumption expenditures (PCE) price index — the Fed’s favorite inflation measure — rose 2.8% in the quarter. Strip out food and energy, and core PCE ran at 2.9%. Both were higher than the prior quarter and still above the Fed’s 2% target.

Another inflation gauge inside the report — the chain-weighted price index — came in at 3.8%, which suggests prices were pushing higher even after accounting for consumers switching to cheaper alternatives.

So yes, growth looked great on paper. But it came with a “prices still sticky” footnote — the exact kind of thing that makes rate-cut optimism wobble.

Companies had a pretty good quarter too. Corporate profits surged by $166.1 billion, a 4.2% jump — a massive leap compared with the previous quarter’s barely-there gain. That helps explain why markets have stayed buoyant even when people complain the economy doesn’t feel that strong: corporate America, at least in aggregate, has been doing fine.

Even with a headline number like 4.3%, traders didn’t panic or pop champagne. The report is backward-looking, and by late December investors are already focused on the fourth quarter, the 2026 outlook, and what the Fed does next.

That said, the mix matters: strong growth plus firmer inflation is the classic recipe for “maybe the Fed can’t cut as soon as people hope,” or at least not as aggressively.

Third-quarter GDP delivered a clear message: the US economy had real momentum heading into the fall, powered mainly by consumers and supported by exports and government spending. But inflation isn’t waving the white flag — and that’s the part that still complicates the “soft landing” storyline.

In other words: the engine is running, but the ride is still bumpy.