San Diego, February 5, 2026
California’s economy has shown a resilient 4.5% growth in Q3, driven by local entrepreneurs and innovations, despite ongoing challenges like housing affordability. Compared to other Western states, California’s growth was the lowest; however, it sustains a positive trajectory as the state adapts to emerging opportunities. The outlook remains cautiously optimistic as efforts are made to address long-term challenges and leverage its strengths in innovation and diverse industries.
California Sees Moderate Economic Growth in Q3 2025
Despite Challenges, Local Entrepreneurs and Innovations Drive Growth
San Diego, California – California’s economy has demonstrated a promising 4.5% growth in the third quarter of 2025, revealing a level of resilience and innovation among its local businesses. This growth is significant as it indicates a turnaround in some economic segments, underscoring the spirit of the state’s entrepreneurs who continue to adapt and thrive amid ongoing challenges.
The 4.5% growth rate, while modest relative to national averages, has put California in a good position compared to many other states. The state’s performance is particularly noteworthy given its struggles with issues like housing affordability and infrastructure needs. However, these challenges have not deterred the entrepreneurial spirit that defines much of California’s economy, highlighting the importance of a favorable business climate that can foster growth and innovation.
California’s Performance vs. Other States
While California’s third-quarter growth was robust, it was the smallest among the Western states. With Montana leading the region at 5.1% and Oregon following at 4.7%, California still maintains a positive trajectory. This relative performance invites a closer look at the unique elements driving the state’s economy and how local businesses are positioning themselves to capitalize on emerging opportunities.
Key Drivers Behind Economic Expansion
The broader context reveals that the national economy expanded at a rate of 4.3% in the same quarter, exceeding expectations set by many economists. This growth has been fueled by increased consumer spending, enhanced exports, and a rise in government expenditures. For California, similar factors apply, but with a distinct local flavor that emphasizes innovation and community-driven initiatives.
Challenges Ahead
As the state’s economy shows signs of growth, it is vital to acknowledge the persistent challenges that lie ahead. Issues such as housing affordability and the need for improved infrastructure continue to pose risks to long-term growth. Nevertheless, current efforts to expand housing supply and restore population growth may provide the necessary support for sustainable economic expansion in the future.
Looking Ahead
The outlook for California’s economy remains cautiously optimistic. With local entrepreneurs and small businesses playing a pivotal role, the state can leverage its strengths in innovation, diverse industries, and a productive workforce. Continued efforts to streamline regulations could further enhance the state’s business environment, creating opportunities for future growth.
Support Your Local Economy
As San Diego residents and business owners look to the future, it is crucial to support local enterprises that contribute to economic vitality. Engaging with small businesses, advocating for reduced red tape, and fostering a community-oriented approach can ensure California remains a leader in economic performance.
Frequently Asked Questions (FAQ)
What was California’s economic growth rate in the third quarter of 2025?
California’s real GDP increased at an annualized rate of 4.5% in the third quarter of 2025.
How does California’s third-quarter growth compare to other Western states?
Among Western states, California’s 4.5% growth was the lowest in the third quarter of 2025, with Montana and Oregon leading the region with 5.1% and 4.7% growth, respectively.
What factors contributed to the U.S. economy’s growth in the third quarter of 2025?
The U.S. economy grew at a 4.3% annual pace in the third quarter of 2025, driven by increased consumer spending, exports, and government expenditures.
What are the future economic prospects for California?
California’s economic outlook remains cautiously optimistic, with efforts to expand housing supply and restore population growth expected to support future economic expansion.
Key Features of California’s Economic Performance in Q3 2025
| Feature | Details |
|---|---|
| Third-Quarter GDP Growth | 4.5% annualized increase |
| Comparison to Western States | Lowest growth among Western states; Montana at 5.1%, Oregon at 4.7% |
| National Economic Growth | U.S. economy grew at a 4.3% annual pace in Q3 2025 |
| Future Economic Outlook | Efforts to expand housing supply and restore population growth expected to support future expansion |
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Author: STAFF HERE SAN DIEGO WRITER
The SAN DIEGO STAFF WRITER represents the experienced team at HERESanDiego.com, your go-to source for actionable local news and information in San Diego, San Diego County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Comic-Con International, San Diego County Fair, and San Diego Pride Festival. Our coverage extends to key organizations like the San Diego Regional Chamber of Commerce and United Way of San Diego County, plus leading businesses in biotechnology, healthcare, and technology that power the local economy such as Qualcomm, Illumina, and Scripps Health. As part of the broader HERE network, including HEREAnaheim.com, HEREBeverlyHills.com, HERECostaMesa.com, HERECoronado.com, HEREHollywood.com, HEREHuntingtonBeach.com, HERELongBeach.com, HERELosAngeles.com, HEREMissionViejo.com, and HERESantaAna.com, we provide comprehensive, credible insights into California's dynamic landscape.
