U.S. Economy Posts 'Extremely Solid' Growth in Q4, Marking Strongest Expansion Since 2022

The U.S. economy delivered its strongest quarterly growth since early 2022, posting a 3.8% annualized expansion in the fourth quarter of 2025, according to preliminary government estimates. This marks a significant acceleration from the previous quarter's 2.1% pace and surpasses analyst expectations of 3.2%. The upward revision underscores enduring economic momentum despite elevated interest rates and persistent inflationary pressures. Consumer spending rose by 4.3% on an annualized basis, the largest gain in over two years, fueled by steady wage growth and strong labor market conditions. Household outlays on durable goods climbed 6.8%, while services consumption increased by 3.9%. Business investment also played a key role, with equipment spending rising 7.1% and intellectual property investment surging 12.4%, highlighting ongoing confidence in long-term productivity gains. The manufacturing sector contributed positively, expanding at a 4.5% annualized rate, supported by gains in industrial output and new orders. Meanwhile, housing starts grew by 11.2% compared to the prior quarter, signaling improving affordability and easing mortgage rates. The trade balance improved as imports declined 2.9% amid global supply chain normalization. Financial markets reacted favorably, with the S&P 500 rising 1.7% following the release, and Treasury yields dipping modestly. Investors now reassess Fed policy trajectories, with futures pricing a higher probability of a rate cut later in 2026. Businesses, particularly in tech and capital-intensive industries, may benefit from renewed optimism about future demand and lower borrowing costs.