A 4.3% boom, reported late

The US economy grew at an annualised 4.3 per cent in the third quarter, according to gross domestic product figures from the Bureau of Economic Analysis. The report arrived months late, after the longest federal government shutdown on record left forecasters working without data. Trading desks greeted the number with more confusion than cheer.

A year of distorted quarters

Nothing about 2025's growth figures has been straightforward. The first quarter showed a contraction because companies rushed to import goods ahead of the tariffs, and imports are subtracted in the national accounts. The second quarter swung to strong growth as those imports fell back. The third quarter, now reported at 4.3 per cent, is the first reading that is not dominated by the import swing, which is one reason markets hoped it would be informative.

The shutdown undercut that hope. It ran from 1 October to 12 November, and the statistical agencies lost weeks of collection and processing time. The bureau abandoned its normal advance estimate for the quarter and published a single delayed release instead, compressing what is usually a sequence of revisions into one late number. By the time it appeared, the quarter it describes had ended almost three months earlier.

A quarter flattered by timing

Experienced analysts quickly marked the 4.3 per cent figure down as unrepresentative. The third quarter caught a bounce in federal spending after the shutdown and a rush by companies to build inventories ahead of the expected winter tariff deadlines. And because October data collection stopped entirely, the statisticians' imputation methods nudged third-quarter consumption higher.

The annualisation convention also magnifies the impression. A 4.3 per cent annualised rate corresponds to growth of a little over 1 per cent in the quarter itself, and small swings in volatile components can move the headline by a percentage point or more. Inventory building is the classic example: goods produced and stockpiled count as output when they are made, even if they are sold at a discount months later, and the same inventories subtract from growth when companies run them down. The arithmetic also works in reverse, so a single soft quarter can look alarming on an annualised basis even when output has barely moved.

A cleaner measure strips out those swings. Economists often look at final sales to private domestic purchasers, which counts consumer spending and private fixed investment and leaves out inventories, government spending and trade. That gauge has been growing more slowly than the headline and is heavily supported by business investment in data centres and computing equipment tied to artificial intelligence. Strip that out too and the underlying pace of the private economy looks far more ordinary.

Driving by the rear-view mirror

Using a stale 4.3 per cent print to plan investment for winter 2026 would be a mistake. The release describes an economy in rude health. More current evidence, from private business surveys to freight volumes, shows companies losing momentum in the closing weeks of the year.

The labour market points the same way. Hiring slowed sharply over the summer, the unemployment rate has drifted up, and large employers including Amazon and Target announced cuts to corporate staff in the autumn. Consumer spending has held up mainly among higher-income households whose wealth has risen with share prices, while lower-income households have leaned on credit. An economy growing at 4 per cent does not usually produce that mix of signals.

Old numbers, new decisions

The practical risk is in how the figure gets used. Companies setting capital budgets, lenders calibrating credit models and investors weighing earnings forecasts all anchor partly on the official growth rate. A strong print can justify expansion plans that the current economy will not support, and the correction arrives later as cancelled projects and inventory write-downs. Retailers ordering stock for the spring and manufacturers setting shift patterns face the same temptation to extrapolate. For the Federal Reserve, a headline this strong gives the committee's hawks another argument for pausing the rate cuts it has delivered since September.

There is also the question of revisions. First estimates of GDP are routinely revised as fuller data arrive, and estimates built on imputed data after a shutdown are likely to be revised more than usual. A quarter that looks like a boom now could be marked down by a large margin next year, long after it has shaped decisions.

The bullish reading

The optimists have a case worth taking seriously. Consumer spending in the quarter was solid by any measure, investment in artificial intelligence shows little sign of slowing, and the tax law signed in July will put larger refunds in household hands early next year. The Fed has cut rates three times since September, which should support borrowing and housing. On that reading, the third quarter overstated the pace but not the direction, and growth will settle at a respectable rate rather than stall.

The weakness in that argument is concentration. Growth that depends on one category of investment and on spending by the wealthiest households is vulnerable to a single shock, whether a correction in technology shares or a pullback in data-centre spending. The broad base of the economy, measured by hiring, small-business sentiment and freight, has been soft for months, and the late GDP report does nothing to change that.

What to watch

The most useful evidence in the next few weeks will come from timely indicators rather than the national accounts: weekly jobless claims, the purchasing managers' surveys for December and January, and the first payroll reports free of shutdown distortions. The Atlanta Fed's running estimate of fourth-quarter growth will be worth watching as data arrive, bearing in mind that it too is built on patchy inputs. The official fourth-quarter estimate is itself likely to be delayed.

The late GDP report paints a boom that has probably already passed. Policymakers who lean on it risk missing a corporate slowdown that set in before the year was out. The first quarter of 2026 is more likely to show growth well below the third quarter's pace, and the Fed will probably discover that only when it is already under way.