WASHINGTON — Robust consumer spending helped propel the U.S. economy to its fastest growth in two years during the third quarter of 2025, even as many Americans continue to voice dissatisfaction with high living costs and uneven economic gains.
Consumer spending grew at a 3.5% annual rate in the third quarter, while gross domestic product increased by 4.4%, according to the Associated Press, citing revised data from the U.S. Commerce Department. The stronger figures marked an update from earlier estimates and signified the fastest expansion since 2023.
Although the headline growth appears strong, surveys indicate that many households remain pessimistic about the economy, mainly due to ongoing inflation and affordability issues. The gap between high spending and consumer confidence reflects what economists often call a “K-shaped economy,” where wealthier households continue to spend easily while lower-income families struggle with stagnant wages and rising prices.
“Affluent households continue to power the economy forward,” Diane Swonk, chief economist at KPMG, told the New York Times. “The concentration of gains in the hands of a few households masked the underlying pain many are expressing in consumer attitude surveys.”
Inflation data released this week showed a mixed picture. The Personal Consumption Expenditures price index indicated that consumer prices increased by 2.7% in October and 2.8% in November, year over year. While inflation has significantly cooled from its post-pandemic peak, goods inflation has started to rise again after tariffs imposed last spring by the Trump administration, the New York Times reported.
The labor market, meanwhile, continues to soften beneath the surface. Although the unemployment rate was a relatively low 4.4% in December, hiring has slowed significantly. Employers added just 50,000 jobs last month, well below the roughly 400,000 monthly gains seen during the 2021–2023 post-COVID hiring boom. Initial claims for jobless aid edged up slightly to 200,000 for the week ending January 17, according to the Associated Press, but stayed below analyst expectations.
Economists describe the current environment as a “no-hire, no-fire” labor market, with companies hesitant to add workers but cautious about cutting staff amid ongoing uncertainty related to trade policy and tariffs under President Donald Trump.
One hopeful development for consumers in 2026 is tax relief. Analysts cited by the New York Times say many Americans are expected to see bigger tax refunds this year due to tax changes enacted in 2025. Researchers at Bank of America estimate that new provisions — including a higher cap on state and local tax deductions, exemptions for overtime and tips, and a larger standard deduction for seniors — could increase refunds by about 26%, or nearly $100 billion nationwide.
