By yourNEWS Media Newsroom
WASHINGTON — The U.S. economy grew at a stronger-than-expected annual rate of 3.4% during the third quarter, accelerating from the previous three months as businesses increased investment and American consumers continued spending despite elevated inflation and borrowing costs.
Gross domestic product, the broadest measure of economic activity, increased at a seasonally and inflation-adjusted annual rate of 3.4% from July through September, according to the Commerce Department’s Bureau of Economic Analysis report released Thursday.
The expansion exceeded economists’ expectations of 3.1% growth and represented a substantial acceleration from the second quarter’s 2.2% increase.
The report showed that business investment, household spending and government expenditures contributed to economic growth, partially offset by weaker exports and rising imports.
One of the strongest indicators was real final sales to private domestic purchasers, a measure of underlying demand that excludes government spending, inventories and net exports.
That measure increased at a 4.9% annualized rate, compared with 4.6% in the second quarter, reaching its fastest pace since the second quarter of 2021.
The acceleration suggests that demand from American households and private businesses remained strong even as the Federal Reserve maintained interest rates at levels intended to restrain inflation.
Consumer spending, which accounts for approximately two-thirds of U.S. economic activity, grew at a 3.8% annual rate.
That matched the previous quarter’s increase and exceeded economists’ expectations of 3.5% growth.
The continued expansion in household spending helped support economic activity despite concerns about higher prices, financing costs and slowing employment gains.
Business investment also contributed substantially to the stronger GDP reading.
Companies increased spending on equipment, particularly computers and information-processing technology, while businesses also accumulated inventories at a faster pace.
Investment in artificial intelligence infrastructure, including computing equipment and data centers, has helped sustain demand for technology and related capital equipment.
According to the Commerce Department, the investment increase reflected stronger private inventory accumulation and equipment purchases, particularly in wholesale trade, manufacturing and information technology.
Government spending also increased during the quarter, reversing its previous decline and adding to overall economic growth.
However, part of the measured increase reflected changes in federal transactions involving oil held in the Strategic Petroleum Reserve.
A reduction in government sales of reserve oil altered the accounting treatment of federal spending without representing an equivalent increase in government purchases or direct economic activity.
International trade, meanwhile, weighed on the overall GDP figure.
Imports increased during the third quarter, subtracting from the GDP calculation, while exports declined.
The increase in imported goods partly reflected demand for equipment and other products used by American businesses.
Under national income accounting rules, imports are subtracted because they represent goods and services produced outside the United States. Their increase does not necessarily indicate weaker domestic demand.
The report also provided updated inflation figures.
The price index for gross domestic purchases increased at a 3.0% annual rate, compared with 5.6% during the second quarter.
The personal consumption expenditures price index, an important inflation measure monitored by the Federal Reserve, increased at a 2.1% annualized quarterly rate, compared with 5.0% previously.
Excluding volatile food and energy prices, the PCE price index increased at a 2.5% rate, down from 3.3% in the preceding quarter.
Those quarterly inflation measurements indicate slower price increases during the July-through-September period, although they do not mean consumer prices returned to earlier levels.
The GDP figures arrive one day after the Federal Reserve voted to leave its benchmark interest rate unchanged at 3.75% to 4%.
Federal Reserve officials cited resilient domestic spending, strong productivity growth and robust capital investment in their assessment of the economy.
“Economic activity is expanding at a strong pace,” the central bank said in its Wednesday policy statement, while warning that inflation remained elevated.
The combination of stronger economic growth and persistent inflation presents a challenge for policymakers deciding whether additional interest rate increases are necessary.
Higher borrowing costs can reduce demand and help contain inflation, but they can also discourage business investment, residential construction and consumer purchases.
The latest GDP figures indicate that private demand remained strong through September despite those pressures.
The report was released less than a week before the Nov. 3 midterm elections, when the economy, inflation and household affordability remain prominent issues.
Although GDP measures total economic production, it does not directly establish whether household purchasing power or living standards have improved equally across income groups.
Strong overall economic growth can coexist with financial pressure on families facing rising housing, food, energy or other expenses.
Thursday’s release represents the government’s advance estimate of third-quarter GDP, meaning the figures remain subject to revision as additional economic data become available.
The Bureau of Economic Analysis is scheduled to publish its second estimate Nov. 25, incorporating more complete information on consumer spending, investment, trade and government expenditures.
For now, the report shows that the U.S. economy entered the final quarter of 2026 with stronger growth than economists anticipated, supported by continued consumer spending and a substantial expansion in private domestic demand.
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