# Happy Holidays & A Look at US GDP

- Published: December 24, 2025
- Author: Brent Ford
- Category: Market Commentary
- URL: https://whiteoakfinancialmanagement.com/2025/12/24/happy-holidays-a-look-at-us-gdp/
- Source: White Oak Financial Management, Inc., Asheville NC

> This is a client letter written on the date above, about the market as it
> stood that day. Cite the date when quoting or summarising it.

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I hope you are enjoying a wonderful holiday season surrounded by family and friends. Amidst the festivities, I wanted to share some thoughts on the U.S. economy following the latest GDP report released this week. Despite a year marked by significant political and policy shifts, the data shows an economy that remains resilient as we head into the new year.

**The Headline: A Summer Surge**  
The U.S. economy grew at an annualized rate of **4.3%** in the third quarter of 2025. This was not only higher than the 3.8% growth seen in the spring, but it also outpaced the 3.2% growth most experts were expecting. This represents the strongest expansion the U.S. has seen in two years.

**What’s Driving the Growth?**  
Several key factors powered this "upside surprise," though the story beneath the surface is more complex than a single number suggests.  

  
-   **Resilient Consumer Spending:** Personal consumption was the primary engine, growing at a robust **3.5%**. Interestingly, this was driven in part by increased spending on healthcare and recreational services, as well as products like personal computers and software.
  
-   **The AI Wave:** Business investment in equipment and software—particularly related to **Artificial Intelligence**—continued to support the economy. While the pace of AI spending has cooled slightly from the explosive levels seen early in the year, it remains a critical pillar of growth, contributing about 0.4 percentage points to this quarter's GDP.
  

  
**Understanding the Trade Impact**  
One of the most significant contributors to this quarter's growth was the shift in international trade, which added 1.59 percentage points to the headline GDP. While a jump in exports provided a direct boost, the result was also heavily influenced by a continued decline in imports. In economic accounting, because imports represent domestic spending on foreign-made goods, they are subtracted from the total GDP calculation; therefore, when imports contract, it technically adds to the domestic growth figure. This trend is likely a response to evolving tariff policies, as businesses adjust their supply chains and inventory strategies in the face of new trade barriers.

**The "K-Shaped" Reality**  
While the 4.3% growth rate sounds like a universal win, economists are increasingly noting a **"K-shaped" recovery**. This means that while the overall economy is growing, the experience is vastly different depending on where you sit:  

  
-   **Affluent households** are benefiting from a strong stock market and high asset prices, allowing them to continue spending on services and travel, which grew by 3.7% this quarter.
  
-   **Lower-income Americans** are facing a different reality. Inflation-adjusted disposable income has remained flat, meaning many families are seeing their raises swallowed up by the rising costs of essentials.
  

  
**Looking Ahead: The Shutdown and 2026**  
The reporting of this data was notably delayed by the government shutdown. Because of this, the strong 4.3% figure actually looks back at a period _before_ the shutdown began. While the shutdown is expected to cause a temporary dip in growth for the final months of 2025, many analysts expect a recovery in early 2026 as federal spending resumes.

**What This Means for Interest Rates**  
This strong growth data creates a challenge for the Federal Reserve. With a strong economy, the Fed may be less inclined to cut interest rates as aggressively as some had hoped. Inflation remains sticky at nearly 3%, and the Fed will likely maintain a cautious stance until they see clearer evidence that prices are cooling back toward their 2% target.

As we gather with loved ones during this season, I want to wish you and your family a joyful holiday season. It is a privilege to partner with you, and I look forward to working together toward a healthy and prosperous new year.