EXPLAINERNews|Business and EconomyIs the US economy strong heading into 2026? The picture is complicatedThe world’s largest economy is growing faster than its peers, but the divide between wealthy and poorer Americans is growing.
As 2025 concludes, the United States economy exhibits mixed performance indicators. While there is notable growth, underlying weaknesses suggest risks ahead.
As 2025 concludes, the United States economy exhibits mixed performance indicators. While there is notable growth, underlying weaknesses suggest risks ahead.
In the third quarter of 2025, the United States saw GDP growth reach an annualized rate of 4.3 percent. This represents the strongest performance in two years, surpassing other developed economies such as the Eurozone and the United Kingdom, which saw growth rates of 2.3 percent and 1.3 percent, respectively. Japan experienced a contraction of 2.3 percent during the same period.
The growth was primarily driven by significant investments in artificial intelligence by major technology firms. AI-related spending accounted for approximately 40 percent of the total growth in 2025.
Despite the positive economic indicators, consumer sentiment remains low. The University of Michigan's index stood at 53.3 in December, a slight increase from previous months. Nonetheless, consumer spending increased by 3.5 percent in the third quarter, the fastest pace since late 2024. Wealthier households significantly contribute to this spending, with the top 10 percent of earners accounting for roughly half of the total expenditure.
As 2025 concludes, the United States economy exhibits mixed performance indicators.
The S&P 500 has risen nearly 18 percent in 2025, outperforming the average annual return of 10.5 percent. However, stock ownership remains uneven, with wealthier households benefiting more from these gains.
Inflation rates have moderated, with year-on-year inflation at 2.7 percent in November, down from 3 percent in September. Despite fears of tariff-induced inflation, the current rate remains above the Federal Reserve's 2 percent target.
Some economists suggest the potential for increased tariffs to impact inflation more significantly in 2026.
Unemployment reached a four-year high of 4.6 percent in November, up from 4 percent in January. Recent government job cuts account for a portion of this increase, but the overall rise in unemployment figures is more substantial.
Based on reporting by Al Jazeera.