Fast growth, fading confidence: Trump’s US looks resilient but not at ease in latest economic data

The US economy beat expectations to grow at 4.3 per cent in the July-September quarter, but the real state of the economy is complicated as consumer sentiment has continued to fall, unemployment has surged, and growth appears to be concentrated among the wealthiest quarters of the country.

Analysts have flagged that third-quarter growth is a backward-looking indicator as it reflects the three months ending in September and does not represent the current state of the economy. Currently, nearly every indicator is in the red.

As per the latest data, unemployment has risen to its highest level in four years at 4.6 per cent, inflation remains above the Federal Reserve’s upper limit of its 2 per cent target at 2.7 per cent, and consumer sentiment has plunged to levels comparable to the 2008 financial crisis.

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Analysts have said that certain aspects of the economy, such as employment, are already in recession, and there is a greater risk of a downturn in 2026.

“The US economy is in a hiring recession. Almost no jobs have been added since April. Wage gains are slowing. 710,000 more people are unemployed now compared with November 2024,” said Heather Long, Chief Economist at Navy Federal Credit Union, on X.

Plunging consumer sentiment, unequal growth

The University of Michigan’s consumer sentiment index fell to around 52.9 in December, nearly 28.5 per cent lower than a year ago — levels comparable to the 2008 financial crisis.

As per the Conference Board, consumer confidence dropped 3.8 points in December to 89.1 — its fifth consecutive monthly decline.

Based on the data, consumers’ assessment of current business and labour market conditions also weakened compared with November, while their short-term outlook remained below the level that signals a recession ahead for the 11th consecutive month, according to Yahoo Finance.

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As a result, Americans should not be overexcited about the GDP numbers, says Yelena Shulyatyeva, Senior US Economist at the Conference Board.

“There’s a big contrast between the actual data, which is lagged, and the more forward-looking index of consumer confidence,” said Shulyatyeva, as per Yahoo.

Moreover, economic growth even in the July–September quarter has been highly unequal, according to The New York Times.

Lower-income families are grappling with slowing wage growth and rising costs of household goods such as beef, coffee, and furniture, while much of the consumption-led growth has been driven by wealthier households spending on travel, recreation, restaurants, and other discretionary purchases, as per The Times.

Separately, analysts have said most industrial growth has been driven by artificial intelligence (AI)-related spending alone. Such an overrepresentation of one sector in growth suggests economic activity is unequal even among businesses.

Private fixed investment has risen in the US economy “only due to AI-related spending”, according to a note from Pantheon Macroeconomics carried by Fortune.

Separately, analyst Oliver Allen said in a note cited by Fortune that capital expenditure “remains depressed, suggesting investment outside of AI-linked sectors remains weak”.