Despite persistent inflation, elevated trade barriers, and a sharp decline in job creation, the U.S. economy posted a 3.8% annualized growth rate in 2025, according to preliminary data. Analysts now project GDP expansion could exceed 4% in 2026, driven by resilient consumer spending and strong corporate investment.
- U.S. GDP expanded at a 3.8% annualized rate in 2025, the highest since 2022.
- Personal consumption rose 4.5% year-over-year, driven by durable goods and services.
- Business investment grew at a 5.1% pace, reflecting strong capital spending.
- Manufacturing activity reached 57.3 in December 2025, indicating expansion.
- Leading economic indicators suggest potential 2026 growth exceeding 4%.
- S&P 500 gained 14% in 2025, supported by strong corporate performance.
The U.S. economy demonstrated unexpected resilience in 2025, posting a 3.8% annualized growth rate in the fourth quarter, marking the strongest performance since 2022. This figure, derived from revised national income and product accounts, underscores a persistent strength in domestic demand, even amid a national inflation rate that averaged 3.6% throughout the year—well above the Federal Reserve’s 2% target. The expansion was fueled by a 4.5% year-over-year increase in personal consumption expenditures, with durable goods spending rising 6.2% and services outpacing expectations. Business investment in equipment and structures grew at a 5.1% pace, reflecting robust capital expenditure despite higher interest rates and geopolitical trade tensions. Key indicators point to an acceleration in 2026. The Institute for Supply Management’s manufacturing index climbed to 57.3 in December 2025, signaling sustained expansion. Meanwhile, the Conference Board’s leading economic index rose 2.1% in the final quarter, suggesting continued momentum in housing, employment, and new orders. Financial markets reacted positively, with the S&P 500 closing the year at 5,420, a 14% gain from the prior year. Treasury yields remained elevated, with the 10-year note averaging 4.3% in 2025, but investor confidence in sustained growth has tempered concerns about a near-term recession.