With the Fed meeting behind us, and some GDP expectations outlined by the Fed as less than robust, I thought we should take a look at expectations for this quarter’s GDP growth. As of September 18, 2025, expectations for U.S. real GDP growth in the third quarter (Q3) of 2025—spanning July through September—remain moderately optimistic, though divergent across sources. Nowcasting models from the Federal Reserve Banks suggest robust growth in the range of 2.1% to 3.3%, driven by strong consumer spending and business investment. In contrast, professional forecaster surveys indicate more tempered expansion around 0.9% to 1.3%, reflecting concerns over policy uncertainty, including potential tariff impacts and a softening labor market. The actual Q2 2025 GDP growth was revised upward to 3.3%, providing positive momentum into Q3. Overall consensus points to annualized growth of approximately 2.0% for the quarter, tempered by higher interest rates earlier in the year and emerging trade tensions.
Recent Economic Context
The U.S. economy entered Q3 2025 on solid footing following a strong Q2 performance. Real GDP expanded at a 3.3% annualized rate in Q2 (April–June 2025), up from initial estimates, propelled by a surge in business investment and net exports. This marked a rebound from softer growth in prior quarters, with personal consumption expenditures (PCE) contributing significantly despite moderating inflation. Headline CPI inflation eased to around 3.0% in Q3 forecasts, down from 3.5% previously anticipated, while the unemployment rate held steady at 4.3%. The Federal Open Market Committee (FOMC) delivered its first rate cut since 2024 in September, signaling a pivot toward supporting growth amid stubborn but declining inflation, with median projections for full-year 2025 GDP at 1.6%.
Key Forecasts and Nowcasts
Forecasts for Q3 2025 GDP growth vary based on methodology: real-time nowcasts incorporate incoming data like retail sales and housing starts, while surveys capture broader professional consensus. The table below summarizes major estimates as of mid-September 2025.
| Source | Forecast/Nowcast | Date | Notes |
|---|---|---|---|
| Atlanta Fed GDPNow | 3.3% | September 17, 2025 | Down slightly from 3.4% on September 16; driven by PCE (1.85 pp contributions) and inventories (0.63 pp), offset by residential investment (-0.26 pp). |
| New York Fed Staff Nowcast | 2.1% | September 2025 | 50% probability interval: [1.0%, 3.2%]; 80% interval: [0.1%, 4.2%]. Reflects balanced risks from consumption and trade data. |
| Philadelphia Fed Survey of Professional Forecasters(SPF) | 1.3% | August 15, 2025 | Up from prior 0.9%; median from 40+ economists, with lover inflation expectations (PCE at 2.9%). |
| Wall Street Journal (WSJ) Economic Forecasting Survey (via American Staffing Associates) | 0.9% | September 2025 | Consensus from ~60 economists signals caution amid labor market softening. |
| Consensus Economics (annual proxy) | ~1.4% (full-year 2025) | July 2025 | Quarterly breakdown unavailable; reflects broader slowdown from 2.8% in 2024. |
| FOMC Summary of Economic Projections (SEP) | 1.6% (full-year 2025) | September s025 | Revised up 0.2 pp; implies H2 moderation from Q2 strength. |
Nowcasts like Atlanta Fed’s GDPNow have trended upward through early September, reaching 3.4% mid-month before a minor pullback on housing data, underscoring data-dependent volatility. Surveys, conducted earlier, appear more conservative, potentially underestimating recent retail sales beats.
Influencing Factors
Positive Drivers
- Consumer Spending: Expected to contribute ~1.9 percentage points (pp) to growth, supported by wage gains and low unemployment. August retail sales exceeded expectations, bolstering nowcasts.
- Business Investment: Equipment spending adds 0.62 pp, reflecting corporate resilience despite higher borrowing costs earlier in 2025.
- Inventories and Trade: Private inventories (0.63 pp) and net exports (0.08 pp) provide tailwinds, though trade surpluses may wane with global slowdowns.
Headwinds and Risks
- Policy Uncertainty: Higher tariffs, anticipated to impact H2 2025, could trim growth by raising consumer prices and disrupting supply chains. The Conference Board notes tariffs already shaved H1 growth, with bulk effects in Q4 2025 and beyond.
- Labor Market Softening: Unemployment forecasts hold at 4.3%, but hiring slowdowns could cap consumption if wage growth decelerates.
- Inflation Persistence: Core PCE at ~2.9% limits Fed easing, potentially constraining investment. S&P Global projects below-potential growth of 1.7% for full-year 2025 due to these restraints.
- Geopolitical and Global Factors: Brokerages foresee U.S. growth at 1–2% amid tariffs and tensions, with H2 vulnerability to external shocks.
Market-based indicators, such as Kalshi prediction markets, price in a 70% chance of exceeding 1.5% growth and 58% for above 2.0%, aligning with nowcast optimism.
Consensus Outlook and Implications
Averaging major Q3-specific estimates (Atlanta Fed, NY Fed, Philly SPF, WSJ) yields a rough consensus of ~1.9% annualized real GDP growth, with nowcasts pulling higher (~2.7%) and surveys lower (~1.1%). This suggests resilience but vulnerability to downside surprises from policy shifts. For full-year 2025, projections cluster around 1.4–1.7%, a deceleration from 2024’s dynamism but avoiding recession. Implications include sustained corporate earnings growth, though sectors like housing (negative 0.26 pp contribution) face headwinds. Investors should monitor October data releases for advance Q3 estimates.
Conclusion
Q3 2025 U.S. GDP expectations balance robust domestic demand against external pressures, with real-time indicators pointing to outperformance relative to earlier surveys. As the quarter progresses, incoming data on employment and trade will refine these views. Policymakers’ navigation of tariffs and monetary easing will be pivotal in sustaining momentum into 2026.
References
- American Staffing Association. (2025). GDP quarterly projections. https://americanstaffing.net/research/asa-data-dashboard/gdp-quarterly-projections/
- BNP Paribas Economic Research. (2025, September 15). The updated scenario and forecasts of the Economic Research. https://economicresearch.bnpparibas.com/html/en-US/updated-scenario-forecasts-EconomicResearch-1-September-2025-9/1/2025%2C51187
- Bureau of Economic Analysis. (2025). Gross domestic product. U.S. Department of Commerce. https://www.bea.gov/data/gdp/gross-domestic-product
- Conference Board. (2025, September 12). Economic forecast for the US economy. https://www.conference-board.org/research/us-forecast
- Federal Reserve Bank of Atlanta. (2025, September 17). GDPNow. https://www.atlantafed.org/cqer/research/gdpnow
- Federal Reserve Bank of Atlanta. (2025). Atlanta Fed GDPNow estimate for 2025: Q3 [PDF]. https://www.atlantafed.org/-/media/documents/cqer/researchcq/gdpnow/realgdptrackingslides.pdf
- Federal Reserve Bank of New York. (2025). New York Fed staff nowcast. https://www.newyorkfed.org/research/policy/nowcast
- Federal Reserve Bank of Philadelphia. (2025, August 15). Third quarter 2025 survey of professional forecasters.
https://www.philadelphiafed.org/surveys-and-data/realtime-data-research/spf-q3-2025 - Future Standard. (2025, July 2). Q3 2025 U.S. economic outlook: Strong winds, deep roots. https://www.futurestandard.com/insights/report/q3-2025-us-economicoutlook-strong-winds-deep-roots
- Kalshi. (2025). US GDP growth in Q3 2025? https://kalshi.com/markets/kxgdp
- Reuters. (2025, September 17). Trading day: Fed cuts, markets not sure where to look. https://www.reuters.com/business/global-markets-trading-day-graphic-2025-09-17/
- S&P Global Ratings. (2025, June 24). Economic outlook U.S. Q3 2025: Policy uncertainty limits growth. https://www.spglobal.com/ratings/en/regulatory/article/250624-economic-outlooku-s-q3-2025-policy-uncertainty-limits-growth-s101631808
- Seeking Alpha. (2025, September 18). September FOMC: Fed delivers first cut since 2024, but tone stays firm. https://seekingalpha.com/article/4823938-september-fomcfed-delivers-first-cut-since-2024-but-tone-stays-firm
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