The US real GDP grew at an annualized rate of 4.3% in Q3 2025, exceeding market expectations. The expansion was largely fueled by robust consumer spending and AI-related equipment investments, while traditional sectors such as construction and real estate remained sluggish, highlighting an uneven economic recovery. Imports declined for the second consecutive quarter, signaling a slowdown in corporate restocking after early-year tariff-driven stockpiling. Despite the lagging nature of GDP data, its resilience may dampen near-term expectations for rate cuts. We maintain our view that the Federal Reserve will hold rates steady in January, with the next potential cut likely in March.
US Q3 real GDP growth of 4.3% outpaced market forecasts of 3.3% and the previous quarter’s 3.8%. Private consumption surged at an annualized 3.5%, up from 2.5% in Q2, contributing 2.4 percentage points to GDP growth. Non-durable goods and services spending accelerated, while durable goods demand moderated.
The consumption boom may be linked to wealth effects from rising asset prices. US equities, buoyed by AI-driven optimism, extended gains in Q3, boosting purchasing power. Notably, Moody’s research indicates the wealthiest 10% of Americans account for nearly half of consumption and hold about 87% of equities, benefiting disproportionately from capital gains. Meanwhile, real disposable income growth flatlined—the weakest since Q2 2022—suggesting wages played a limited role in driving spending. Looking ahead, recent stock market volatility and a >20% drop in Bitcoin from October highs could erode wealth effects. Weak labor market momentum and stagnant wage growth may further weigh on consumption.
Fixed investment growth slowed to 1.0% annualized in Q3 (vs. 4.0% in Q2), with AI-related demand offsetting broader weakness. Equipment investment rose 5.4%, led by a 44% surge in computer hardware spending. Software investment also held firm at 5.4%. In contrast, construction and real estate investments fell 6.3% and 5.1%, respectively, extending multi-quarter declines. Inventories contributed less to growth, reflecting subdued corporate investment and restocking amid persistent policy uncertainty.
Risks loom for AI investment momentum. Growing skepticism over tech capex returns and tighter financing conditions (e.g., Oracle’s widening CDS spreads) may constrain future AI-driven outlays. Given AI’s outsized role in equipment investment this year, any slowdown warrants close monitoring (see report: *AI’s Triple Risks: Investment, Financing, and Correlations*).
Exports jumped 8.8% annualized, led by a 64% surge in aircraft/engine shipments (nearly 30% of export growth). Imports fell 4.7%, with declines in autos and consumer goods, though computer-related imports rose—underscoring sustained AI sector demand. This aligns with investment trends: AI-driven expansion persists as traditional sectors lag.
The resilient GDP print may temper imminent rate-cut expectations. Since December’s FOMC meeting, Fed officials—including Chair Powell and NY Fed’s Williams—have signaled patience, citing policy rates near neutral. While backward-looking, strong growth data supports this stance. We expect the Fed to hold rates in January, with March presenting the next likely easing opportunity (see report: *Fed Rate Cuts to Slow as Balance Sheet Expansion Takes Priority*).
**Charts**: 1. *US Fixed Investment Divergence*: AI-related demand holds up amid traditional sector weakness (Source: BEA, CICC Research). 2. *US GDP Breakdown* (Source: Haver, CICC Research).