An Archaeological Dig Into Delayed US GDP Data

In the economic equivalent of an archaeological dig, the US Bureau of Economic Analysis (BEA) released its first estimate of Q3 2025 GDP Tuesday. Yep—the first estimate of growth from July through September came on Festivus, delayed by the government shutdown. When the statisticians sifted through the sand, they uncovered much healthier-than-feared headline growth … with some caveats we think are worth noting. Now, we don’t think these dusty numbers mean much for markets now, but walking through them may help illustrate trends entering the current quarter.

At a headline level, US real GDP growth accelerated to 4.3% annualized, up from Q2’s 3.8% and smashing estimates projecting a slowdown to 3.0%.^[i] Key to growth was accelerating consumer spending, which grew 3.5% annualized, up from Q2’s 2.5% and Q1’s 0.6%.^[ii] That strong spending helped paper over a slowdown in business investment (from 7.3% annualized to 2.8%) and another decline in residential real estate investment (-5.1% for the second straight quarter).^[iii]

But don’t let it blind you: Business investment’s slowdown is worth noting. Many spill oodles of pixels on consumer spending’s importance, given it is 68% of US GDP.^[iv] But it tends to be far more stable than business investment—consumption rarely swings the economic cycle. Investment is different, and it may be that tariff uncertainty is cooling this now. We will be watching.

Still, data in Q3 were overall fine, but not as robust as some coverage is suggesting. Headline GDP growth’s acceleration is garnering most attention from pundits. But combining consumer spending, business investment and real estate shows growth little changed from Q2. (Exhibit 1)

Exhibit 1: Good Growth Persisted

Source: BEA, as of 12/23/2025. Headline GDP and the sum of contributions from Personal Consumption Expenditures, Nonresidential Fixed Investment and Residential Real Estate Investment.

Like in Q2, the sum of these three core categories lags headline growth. Why? Well, in Q3, government spending ticked up, adding 0.4 percentage point to headline growth.^[v] Maybe that seems surprising, given the government shutdown. But this was almost entirely national defense spending plus state and local spending. The economic effects of government spending are debatable, hence why we think it is important to strip that out.

But the bigger factor, and one subject to heavy skew this year: trade. In Q3, US exports rose 8.8% annualized, adding 0.9 percentage point to GDP.^[vi] Meanwhile, imports fell. GDP’s mathematics employ net trade—exports minus imports—to tally the category’s effects. Hence, imports’ fall boosts trade’s overall contribution to GDP to 1.6 percentage point.

Normally, this calculation is disconnected from economic reality: Falling imports could point to weak domestic demand. But American firms have spent most of 2025 grappling with an ever-changing tariff landscape. When the Trump administration took office, talk and fear of tariffs was widespread. Even before April 2’s Liberation Day announcements of sweeping global tariffs, on-again, off-again tariffs on Canada, China and Mexico spurred uncertainty.

So businesses did what they do: They front ran implementation of tariffs in Q1, boosting inventories. Imports soared 38% annualized in Q1.^[vii] Inventories boomed, adding 2.6 percentage points to growth that quarter. In the two quarters since, imports and inventories have fallen. Businesses appear to be drawing down inventories they boosted to sidestep taxes. While Q3’s GDP data show less influence from this, it wasn’t zero.

Now, that perhaps isn’t earthshattering news. Thing is, we don’t think anything in Tuesday’s release is news to stocks. The swift recovery and rise this year foretold that economic reality was unlikely to prove as bad as feared. Data, however delayed and mummified, continue supporting that.