Strong US growth supported by consumer spending, exports
Real gross domestic product (GDP) grew an annual rate of 4.4% in the third quarter, according to the updated estimate released by the US Bureau of Economic Analysis. This follows a 3.8% increase in the second quarter.
The third quarter GDP growth was driven by stronger consumer spending, higher exports and increased government expenditure, and rising investment. Imports, which reduce GDP, declined during the period.
Real gross domestic income (GDI) rose 2.4% in Q3, unchanged from the previous estimate. Corporate profits from current production, including inventory valuation and capital consumption adjustments, increased by $175.6 billion in the third quarter, an increase of $9.5 billion than initially reported.
Michael Pearce, chief US economist at Oxford Economics, noted that the economy is expected to be slow in the fourth quarter due to the government shutdown and weaker auto sales, fluctuations in net trade and inventory movements tied to tariff-related shipment timing that could present an upside risk.
Eurozone consumer confidence improves
Consumer sentiment in the eurozone edged up in January, according to data released on January 22. The European Commission’s flash consumer-confidence indicator for the eurozone rose to -12.4 from -13.2 in December, marking its strongest level since February 2025. However, the uptick in sentiment may be difficult to sustain and any recovery in confidence may prove short-lived amid escalating tensions between the US and Europe.
Most of the survey responses were collected before geopolitical strains intensified following US President Trump’s proposal to annex Greenland. Additional volatility emerged after threats of tariffs on eight European countries that opposed the plan, measures that were later withdrawn.
UK unemployment remains elevated
The UK unemployment rate held steady in the three months to November according to data released on January 20 by the Office for National Statistics, remaining near its pandemic-era highs and reinforcing concerns about the economy’s overall condition. The jobless rate stood at 5.1%, unchanged from the previous three-month period and in line with expectations.
Annual wage growth, excluding bonuses, rose 4.5%, matching economists’ forecast. Job vacancies between October and December rose by 10,000 to 734,000 compared with July to September period. Working days lost to labour disputes climbed to 155,000 in November, the highest since January 2024.
Unemployment gradually increased through 2025 as weak business confidence and sluggish economic growth weighed on hiring. The rate peaked ahead of the government’s autumn budget in November, when uncertainty surrounding tax and regulatory policy further discouraged recruitment.
The combination of a soft labour market and moderating wage growth has intensified calls for additional interest rate cuts by the Bank of England.
This article does not constitute legal and, or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap.371 of the Laws of Malta) and the Investment Services Act (Cap.370 of the Laws of Malta).
