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- GDP Hit 4.3%, and the Consumer Refused to Tap Out
GDP Hit 4.3%, and the Consumer Refused to Tap Out
Noah Zelvis
December 28, 2025
That delayed Q3 GDP report finally arrived, and it came in hot: 4.3% annual growth, the strongest in two years, powered by consumers who kept spending even while the mood stayed kind of cranky.
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The U.S. economy grew at a 4.3% annual pace in Q3, beating expectations and picking up from the prior quarter. Consumer spending did the heavy lifting, running at a 3.5% pace. People kept buying, even if they complained the whole time.
Where the spending showed up matters. A lot of the strength came from services, including healthcare and travel, plus some tech-related spending like PCs and software. It was not a pure new TV in every room quarter. It was more we’re still living our lives, we’re just being choosy about the big stuff.
Under the hood, it was a mixed report:
Business investment still grew, but it slowed from the prior quarter.
Residential investment fell again, which fits the housing market still being jammed up.
Inflation picked up a bit in the quarter, so the Fed still has a reason to stay cautious.
Disposable income was basically flat after inflation, which helps explain why lower-income consumers are feeling squeezed even if the top-line economy looks strong.
One more important detail: trade gave the headline GDP number a boost, because exports rose and imports fell. That helps the GDP math, but it does not always feel like a party on Main Street.
So the takeaway is not everything is awesome. It’s the consumer is still the engine, but the engine is running a little rough. That’s a pretty normal setup for late-cycle markets: strong enough to avoid an abrupt downturn, uneven enough that stock picking matters.
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Actionable Stuff
Don’t fight the consumer, follow the receipts. Services are holding up better than big-ticket goods.
Lean into everyday spend platforms. Businesses that clip a fee every time someone pays are quietly powerful in this environment.
Pick companies that win with mixed-income shoppers. The uneven consumer trend is real, so value + practicality matters.
Avoid the pure boom bets. You want steady demand, not names that require a perfect economy to work.
Buy in pieces. Start now, add on bad headlines, add again after the next major data drop.
Trivia: What percentage of U.S. paper currency is actually made from cotton and linen instead of wood pulp? |
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Top Picks
Select Medical (NYSE: SEM) Healthcare showed up as a key driver in the GDP breakdown, and Select Medical sits right in the “people still need care” lane. Rehab, outpatient services, and ongoing treatment do not depend on consumers feeling rich. In a strong-but-uneven economy, healthcare spending tends to stay resilient because it’s not optional for most households. If growth cools next quarter, this is the kind of demand that usually keeps showing up. |
Toast (NYSE: TOST) If the consumer is spending more on services, restaurants stay in the conversation, even when people cut back elsewhere. Toast sells the operating system for restaurants: payments, point-of-sale, and tools that help owners run tighter. When traffic gets choppy, restaurants care even more about efficiency, upsells, and managing costs. Toast can benefit whether the consumer is splurging or just being picky, because either way the restaurant wants the tech that keeps the line moving. |
Shift4 Payments (NYSE: FOUR) Travel and experiences were part of the Q3 strength, and Shift4 is a clean way to ride that without betting on one specific airline or hotel chain. Shift4 runs payments for hotels, restaurants, stadiums, and other places where people spend on living their lives. If the consumer keeps prioritizing services, the payment rails keep collecting tolls. If spending slows, share gains and product depth matter more, and Shift4 has room to keep expanding into more merchants. |
Sprouts Farmers Market (NASDAQ: SFM) The GDP story includes an uneven consumer, and that usually means two things at once: people keep buying essentials, and they get more intentional about value. Sprouts plays the healthy essentials angle without being purely premium. It can pull in budget-conscious shoppers who still want better-for-you staples, and it can hold up even if discretionary spending cools. In a world where disposable income is not really rising, grocery winners that drive repeat trips tend to look better and better. |
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Bottom Line
Q3 GDP at 4.3% is a loud reminder that the U.S. economy can still hum even when sentiment is gloomy. Consumers kept spending, especially on services like healthcare and travel, while housing and some parts of business investment stayed softer. The consumer is still the engine, but it’s an uneven ride, and that’s where smart positioning pays.
Lean into mid-caps tied to services demand and everyday transactions, keep the boom-bet exposure limited, and let the steady spenders do the compounding for you.
That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next.
Best Regards,
—Noah Zelvis
Macro Notes