The US economy continues to defy the experts.
The US economy went gangbusters in the third quarter, proving again that the administration’s aggressive tariff and tax plans have not put the country on the path to a downturn. What’s more, the July-September data suggested conditions could be better than they were a year ago. Has Trump’s economy delivered so far? Put simply, the recession – or depression – has been canceled.
Trump’s Economy Under Spotlight
CNBC’s Rick Santelli had this to say about the newest GDP numbers: “This is strong!”
The Bureau of Economic Analysis released the highly anticipated and delayed third-quarter gross domestic product report on Dec. 23. The results? To quote President Donald Trump: “A+++++.” Well, not that amazing but close enough.
Growth came in at 4.3%, up from the 3.8% registered in the second quarter. Economists had penciled in a reading of 3.3%. Economic conditions were bolstered by consumers opening their wallets, with spending climbing 3.5%. Exports also boomed, rising 8.8% in the last quarter. Both numbers accelerated from the second quarter.
In addition, corporations performed remarkably well, with profits soaring 4.2% to $166.1 billion.
Government expenditures, however, bounced back following two straight quarters of declines. Federal, state, and local outlays rose 2.2%. While this boosts the bottom line, it is not what the administration wants when it is trying to “reprivatize the economy.” The good news is that consumer purchases outpaced government consumption: 2.39 percentage points to 0.39 percentage points.
Meanwhile, imports, which are subtracted from GDP calculations, plunged 4.4%.
Here is the downside: Gross private domestic investment dipped 0.3%. The headline number was driven by a 5.1% drop in residential investments. This is not what you want to see when the administration promises the One Big Beautiful Bill will lead to a rebounding consumer and surging investments.
Still, on the surface, this was a good reading for the White House, especially compared to President Trump’s predecessor. The GDP growth rate in the third quarter of 2024 was 3.3%. So, the administration can temporarily gloat by stating that Trumponomics is superior to Bidenomics. And, of course, Trump did celebrate, writing on Truth Social:
“The TARIFFS are responsible for the GREAT USA Economic Numbers JUST ANNOUNCED … AND THEY WILL ONLY GET BETTER! Also, NO INFLATION & GREAT NATIONAL SECURITY. Pray for the U.S. Supreme Court!!! President DJT”
Stale Data?
Critics will say this is stale data, and everyone should look at the current quarter. Examining some of the early estimates gives cause for concern. The New York Federal Reserve Staff Nowcast suggests the economy will expand less than 2%, and many revisions are heading downward. By comparison, growth came in at 0.8% in the final three months of 2024, so it would be an improvement.
At the same time, senior administration officials have warned for weeks that the record-breaking 43-day government shutdown would trim gross domestic product as economic activity diminished. Economic observers, including Oxford Economics, BMO, and the Congressional Budget Office, have projected that whatever was lost in the fourth quarter would be returned in 2026.
Other data complemented the GDP report, including durable goods orders, which tumbled 2.2% in October. Industrial production rebounded 0.2% last month, while manufacturing output was flat.
Inflationary pressures were also prevalent in the latest government report. The personal consumption expenditures (PCE) price index, the Fed’s primary inflation gauge, rose to 2.8%. Core PCE, which strips out volatile energy and food, ticked up to 2.9%. The good news is that these did not come in hotter than expected, suggesting that while price pressures persist, they are not spiraling out of control.
Hope or Hopeless?
Treasury Secretary Scott Bessent is confident that 2026 will deliver a victory for Main Street. But this does not mean Wall Street has to lose. In other words, everyone will be winning as they flip the calendar to the new year. Fiscal stimulus, lower interest rates, tax refunds, capex spending, and
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