The US economy grew faster than expected in the third quarter, as resilient consumer spending and AI-driven business investment offset the impact of higher oil prices due to conflict in the Middle East.
The Economic Analysis Bureau of the Ministry of Commerce said on Thursday, in its preliminary estimate of the gross domestic product during the third quarter, that the gross domestic product rose at an annual rate of 3.4 percent during the past quarter. Economists polled by Reuters had expected GDP growth at a rate of 3.2 percent.
Estimates ranged from a growth rate of 1 percent to 4.2 percent, according to Reuters.
This strong growth performance stands in sharp contrast to the negative assessment that households give of the economy, reflected in the record low levels of approval for President Donald Trump, and the sharp deterioration in consumer confidence. The report was issued less than a week before the midterm elections scheduled for Tuesday, which will determine who will control Congress.
The economy is expanding at a pace far exceeding the growth rate that some Federal Reserve officials believe does not lead to higher inflation, estimated at about 2 percent. On Wednesday, the US Central Bank kept the key interest rate within a range between 3.75 and 4.00 percent, while acknowledging that inflation “is still high.”
Economists had expected the Federal Reserve to raise interest rates in December. Federal Reserve Chairman Kevin Warsh told reporters that “economic activity is expanding at a strong pace,” noting that “despite the continuing uncertainty, due in part to geopolitical developments, domestic spending has shown resilience.”
As AI-related spending becomes increasingly dominant, some economists said that strong GDP growth may not reflect the true picture of the economy. Investors are largely focused on the escalating costs of long-term AI projects, the returns of which remain uncertain. Technology companies have borrowed huge sums of money over the past year to finance spending on artificial intelligence, which poses a potential risk to spending on equipment. However, economists were already expecting a decline in the strength of this factor supporting growth, although they expected this decline to take the form of a decrease in the pace of spending, rather than stopping it completely.
Consumer spending, which represents more than two-thirds of the economy, rose by 3.8 percent during the period from July to September, after recording the same rate in the second quarter. The decline in layoffs to historic levels and the recording of a moderate pace of hiring contribute to supporting spending, although wage growth has sometimes fallen below the inflation rate.
But families also reduced their savings rates and withdrew their savings to finance spending. With average gasoline prices continuing above $4 per gallon, in light of the ongoing US-Israeli war with Iran, economists expected a slowdown in consumer spending.
The main Saudi market (TASI) ended Thursday's trading with a decline of 1 percent, with the index closing at 9,922 points, losing 102 points, after 3 consecutive days of gains that brought it back above the level of 10,000 points. Despite the decline in the last session, the index ended the week higher by more than 225 points, or 2.4 percent.
The total value of trading amounted to about 4 billion riyals, while the index moved during the session between 9,902 points (lowest level) and 10,053 points (highest level), which is the opening level of trading.
The session witnessed a wide decline in stocks, led by “Al Ahli Saudi” shares, which fell by 2 percent, while “Al Rajhi Bank” shares declined by about 1.1 percent, and “STC” shares decreased by 0.8 percent. Saudi Aramco shares also fell by 0.3 percent.
The shares of “Qassim Cement”, “Saudi Cables”, “SAPTCO”, “Riyadh Cables”, and “AMAC” declined by rates ranging between about 2 and 5 percent, after the companies announced their financial results.
On the other hand, the shares of the “Saudi Group” rose by 5 percent, after the company announced an increase in third-quarter profits to 90 million riyals.
“Reaya” stock also rose by about 4 percent, and “Addis” stock rose by about 2 percent, while “Gulf General” stock topped the list of stocks with gains of nearly 10 percent.
British Bank Lloyd's announced on Thursday that its net profits after taxes rose by 120 percent during the third quarter of the year, benefiting from the non-recurrence of the large financial allocations it set aside in the previous year to compensate customers who were harmed by improper practices in granting car loans.
The bank said, in a statement, that its net profits after taxes amounted to 1.71 billion pounds ($2.27 billion) during the period from July to September, compared to the same period last year. Its revenues also rose by 9 percent, reaching £5.07 billion.
The bank's CEO, Charlie Nunn, said that the group is achieving "strong and sustainable financial performance," noting continued income growth, and stressing that the bank is on the right track to achieve its annual goals.
Despite the positive results, Lloyds shares fell by 5 percent during late Thursday morning trading on the London Stock Exchange, at a time when the FTSE 100 index, which includes major British companies, recorded a slight increase.
Ross Mold, investment director at AG Bell, attributed the stock's decline to investors' disappointment, even though the results were largely in line with expectations, explaining that basic revenues were slightly lower than estimates, while the bank did not raise its expectations for the current year.
The bank's performance in the third quarter of 2025 was affected by allocations amounting to 800 million pounds sterling, allocated to cover the compensation costs associated with the car loan case, which included a number of British banks.
The British Financial Conduct Authority proposed obligating lenders to pay compensation to consumers worth 8.2 billion pounds, against the backdrop of illegal practices in some car loans dating back to 2007. However, the implementation of the compensation program was postponed due to legal challenges.
In a related context, the budget announced by the British government on Wednesday included a decision to increase the additional tax imposed on bank profits, with the aim of contributing to supporting millions of families facing rising energy bills.
Richard Hunter, head of markets at the Interactive Investor platform, explained that the tax increase was less than what the markets feared, which contributed to a rise in British bank shares on Wednesday following the announcement of the decision.
