The headline sounds great where real GDP grew at a 4.3% annual rate in Q3 2025, up from 3.8% in Q2. In plain terms, that’s about 1.1% growth for the quarter, just expressed at an annualized pace.

But once you dig into what actually drove that number, it feels less like the economy is firing on all cylinders and more like the math lined up in a way that flatters the moment.

What’s Actually Driving The 4.3%

The BEA is pretty explicit about the mix…

• Consumers carried the load. Consumer spending added about +2.39 percentage points to GDP.

• Trade did a lot of the work. Net exports added +1.59 points, more than a third of the entire print.

• Government helped. Government spending added about +0.39 points, with defense a key contributor.

• Investment barely mattered. Gross private domestic investment contributed roughly -0.02 points, essentially flat.

So growth was strong, but not broad. It was consumption plus a big trade swing plus government, with private investment largely absent.

Why GDP Can Look Better Than It Feels

This is where the report gets quietly revealing.

First, falling imports boost GDP even when that’s not healthy. Imports are subtracted in the GDP formula. So when imports fell (-4.7%), GDP automatically looked stronger. Sometimes that means more domestic production. But often it means cooling demand, inventory drawdowns, or households trading down. GDP treats all of that as a positive either way.

Second, government spending counts the same as private demand. Government spending rose (+2.2%), lifting GDP. But that doesn’t tell you whether the private economy is getting healthier, or whether we’re leaning harder on the public balance sheet to keep growth afloat.

Third, income is telling a softer story than output. This is the biggest tell…

•Real GDP: +4.3%
•Real GDI: +2.4%
•Average of GDP and GDI: +3.4%

When GDP runs almost 2 points hotter than GDI, it’s a sign output looks stronger than incomes can really support. The statistical discrepancy hit 1.2% of GDP, which is basically the data saying these stories don’t fully line up. That 3.4% average is often a more honest read than the 4.3% headline.

Fourth, consumers are spending but incomes aren’t rising. Yes, consumer spending here is inflation adjusted. Real PCE rose +3.5%. But real disposable personal income was flat (0.0%). That gap gets filled by lower saving, more credit, or pulling spending forward. Sure enough, the saving rate fell to 4.2%, down from 5.0% in Q2. That’s not collapse but it is less cushion.

Where The Weakness Is Hiding

Look at the interest sensitive parts…

•Residential investment: -5.1%
•Structures (commercial investment): -6.3%

That’s the economy’s future capacity moving backward. Housing and commercial structures are classic late cycle casualties of high rates. On top of that, private inventory investment declined, dragging on overall investment.

This wasn’t clean, non inflationary growth…

• Gross domestic purchases price index: +3.4%
• PCE price index: +2.8%
• Core PCE: +2.9%

All of these accelerated versus Q2. Part of why nominal GDP looks so strong (current dollar GDP +8.2%) is simply that prices are still rising fast enough to pad the numbers.

My View

This report doesn’t read like all clear. It reads like late cycle resilience the kind that can look fine until it doesn’t.

• The consumer is still spending, but with flat real income and lower saving.

• Investment, especially housing and structures, isn’t confirming the optimism.

• The GDP–GDI gap says the strength isn’t fully backed by incomes.

• And data delays tied to the government shutdown raise the odds of revisions later.

So if someone wants to victory lap 4.3% GDP, the pushback is show me the same strength in private investment, in real incomes, and in a narrowing GDP-GDI gap. That’s when growth is real and durable.