California’s economy is experiencing significant growth, positioning the state as a contender for the title of the world’s fourth-largest economy. According to data from the U.S. Bureau of Economic Analysis, California’s gross domestic product (GDP) reached an impressive annual rate of $4.296 trillion as of the third quarter of 2025, marking a 4.5% increase from the previous year. This surge in economic output places California ahead of Japan, which has a GDP of $4.28 trillion, by a narrow margin of $16 billion.
The competition for this coveted fourth spot is intense. The International Monetary Fund (IMF) indicates that India is also in the race, with its economy valued at $4.125 trillion. The gap between California and its competitors, including the United Kingdom at $3.96 trillion, is approximately $300 billion, representing a notable 7% difference. Given India’s rapid economic growth, particularly due to its large population, it is anticipated that the country may soon surpass California in global economic rankings.
California ascended to the fifth-largest economy in 2017 and claimed the fourth position in 2024. Despite this remarkable achievement, the state’s economic growth is not uniformly experienced among its residents. While overall figures indicate prosperity, other economic metrics, such as the consumer confidence index, reached a five-year low in January. This highlights the importance of examining broader economic indicators alongside individual financial experiences.
State-Level Economic Insights
When analyzing California’s economic performance compared to other U.S. states, the picture becomes more complex. In the third quarter of 2025, California’s GDP growth rate of 4.5% was the fastest it has seen in over two years, yet it ranked only 25th among U.S. states. In contrast, Texas grew at 4.2% and ranked 32nd, while Florida’s growth rate of 3.5% placed it at 42nd. Several states in the central U.S. outperformed California, with Kansas achieving 6.5%, South Dakota at 6.3%, and Arkansas at 5.8%.
Over the two years leading up to the second quarter of 2025, California’s average GDP growth stood at 2.9%, placing it 15th among states. Notably, the state experienced a growth surge of 1.6 percentage points in the third quarter of 2025 compared to its previous two-year average, yet this still ranked it 32nd nationally. Comparatively, states like Kansas and South Dakota demonstrated larger improvements, illustrating the dynamic shifts in economic performance across the country.
As California navigates its economic landscape, these indicators emphasize the multifaceted nature of economic health. While the state boasts impressive overall GDP figures, individual experiences may vary widely due to differing factors that influence financial well-being. The ongoing competition with Japan and India for a higher global ranking serves as a reminder of the ever-evolving nature of economic standings and the complexities involved in assessing true prosperity.
