In Q3 of 2025, the United States’ real gross domestic product (GDP) increased 4.3%, the highest quarterly growth since Q3 2023. GDP is made up of four major components: personal consumption expenditures, gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment. These four items measure how much the United States produces in goods, services, and investments and provides an estimate of the size of the economy.
If GDP is growing steadily, it usually means the economy is healthy and able to grow normally. If we have shrinkage or negative growth in GDP, that is an indicator of an inability to produce and consume normally. While GDP is one way of measuring the health of the economy, it is a lagging metric, which makes it difficult to rely on for real-time information. It is useful, however, in looking back at a period in which many people felt negatively impacted by the economy and seeing whether it was a prolonged period of economic downturn or simply a localized month of economic decline.
For example, the data for Q3 2025 covers July 1, 2025 to September 30, 2025. The news cycle in September was highlighting a dramatic slowdown in the labor market and signs of economic slowdowns. Meanwhile, GDP shows an increase in consumer spending and exports, signaling a stronger economy where people are comfortable spending more money. Higher spending is not generally consistent with an economy where more people are unemployed.
On the other hand, GDP may overlook consumer sentiment in times of market slowdown and could overstate the health of the economy. There are many reasons for consumer spending to increase despite a slower economic period, but higher GDP over that time period indicates that the slowdown did not have a lasting impact on economic health.
Inflation Moderates
Another economic indicator that many rely on is the inflation rate. The inflation rate measures how much more or less expensive a set of goods is over a period of time, and this can be compared to rising or falling income levels to indicate whether people are better or worse off. If prices are rising faster than income, then people are losing purchasing power. For example, the consumer price index rose 2.7% over the last 12 months, while average hourly earnings increased 3.8% over the same period, indicating a 1.1% gain in real earnings or purchasing power.
An increase in purchasing power does indicate that our economic health is positive. People are able to stretch their dollar further, and this could contribute to higher consumer spending in GDP as well.
As the Trump administration continues to implement American policy, these economic indicators continue to show strong growth and benefit to the American people. Their take-home pay is rising, thanks to the Working Families Tax Cuts.
Instead of looking at the short-term difficulties that arise month to month, Americans can rest assured that their money is actually gaining power again and their hard work continues to pay off.