US Economy Shows Robust Q3 Growth Amid Falling Mortgage Rates and Mixed Consumer Confidence Signals

Strong Third Quarter GDP Growth Exceeds Expectations

The US economy expanded at a **4.3% annualized rate** in the third quarter of 2025, marking the fastest pace in two years and surpassing analyst forecasts of 3.3%.[4][5]

Consumer spending accelerated to **3.5%** from 2.5% in the prior quarter, while exports surged due to moderated trade policies.[4]

The report, delayed from October due to a government shutdown, was released on December 23, 2025, with President Trump claiming credit for the surge.[5]

Mortgage Rates Hit 15-Month Lows Sparking Housing Hopes

Average **30-year fixed mortgage rates** dropped to **6.12%**, a new low for the period, as reported on January 2, 2026.[5]

This decline offers potential relief for homebuyers entering the new year, with analysts noting improved affordability amid persistent high prices.[5]

Falling rates coincide with lower gas prices during the holiday season, easing some consumer costs.[5]

Consumer Confidence Weakens Despite Economic Gains

December's Consumer Confidence Index fell to **89.1**, down from a revised 92.9 the prior month, hitting the lowest level since new tariffs took effect.[4][5]

The Present Situation Index dropped sharply by 9.5 points to 116.8, reflecting worries over inflation, tariffs, and labor market softening.[4]

Expectations remained steady at 70.7, but survey respondents expressed anxiety about ongoing price pressures.[4]

Key Labor Market Updates

• November jobs report added **64,000 jobs**, a slowdown from prior months, with unemployment rising to **4.6%**, the highest in four years.[5]
• Weekly jobless claims fell to **199,000** in late December 2025, signaling low layoffs despite weakening hiring.[6]

Upcoming Economic Events and Policy Outlook

The January 2026 economic calendar features critical releases like Nonfarm Payrolls, Consumer Price Index (CPI), and Federal Reserve meetings on monetary policy.[2]

Forecasters anticipate slower growth into early 2026 due to tariffs, with PCE inflation projected to peak above 3% before easing, and unemployment nearing 4.7%.[3]

Fiscal policies, including tax cuts and accelerated depreciation, may support growth, offset by cuts to green investments and programs like Medicaid and SNAP.[3]

Market Reactions and Broader Implications

The S&P 500 closed 2025 up **17%**, capping a strong year for stocks amid resilient consumer spending.[6]

Economists highlight technology-driven productivity from AI and energy infrastructure as key growth drivers heading into 2026.[1]

Despite positive data points, heightened policy uncertainty from tariffs and spending cuts tempers optimism for the year ahead.[1][3]