Your Money · Report · File No. 261029-645
Economy grew 3.4% in third quarter on AI spending, with inflation still above target
The Commerce Department says growth beat forecasts, the last big economic report before Tuesday's midterms. Prices are still rising well above the Fed's target, so the number may not change how many voters feel.
Every quote in this story (2) was matched word for word against its source. How we work
The U.S. economy grew at a 3.4% annual pace from July through September, the Commerce Department reported Thursday. That is faster than the 2.2% pace in the spring, and faster than the roughly 3% economists surveyed by the data firm FactSet had expected 1. Yahoo Finance put the consensus forecast at 3.1% 3.
GDP, or gross domestic product, is the total value of goods and services the country produces. This is the first of three government estimates for the quarter, so the figure can still be revised 1.
What drove the growth
Business investment outside housing rose 12.7%. Spending on information processing equipment jumped 37.4%, software rose 9.6%, and research and development rose 7.5%. The AP ties that surge to the artificial intelligence boom 1.
Consumer spending rose 3.8%, which Yahoo Finance calls the strongest pace since the end of 2024 3. NPR reports that higher-income households helped lead that spending 2. Housing investment fell 3.3% and has dropped in six of the last seven quarters, which the AP attributes to high mortgage rates 1.
From Channel GOPEl-Sayed: Trump built a ballroom, raised pricesAbdul El-Sayed · 188 plays · captioned, with the source named
Not everything pointed up. Exports fell, and rising imports, which are subtracted from GDP, weighed on growth. Economist Liz Ann Sonders of Charles Schwab said the AI build-out is very import-driven 3.
Prices tell a different story
NPR reports that prices rose 3.6% in September from a year earlier, well above the Federal Reserve's 2% target. Wage growth has trailed inflation, and lower-income Americans are struggling more than high earners 2. Fox Business reported earlier this month that the consumer price index rose 3.7% over the past 12 months 4.
The personal saving rate fell to 3.8% in September from 4.1% in August 2. The Fed held interest rates steady Wednesday, but NPR says pressure to raise them in December is growing after the inflation reading 2.
The economy is moving forward but it's a very, very fragile growth.
The politics
The White House called the report a major boost for the economy 3. This is the last major economic report before Tuesday's midterm elections 3.
Democrats have centered their campaign on prices. House Democratic Caucus Chair Pete Aguilar made that case after the September inflation report, before today's GDP release 4.
Inflation is up. The cost of gas and groceries is soaring.
The White House has answered that criticism by saying its agenda has blunted what it calls Biden's inflation crisis 4.
That matters because the two numbers measure different things. GDP shows how much the economy produces, and it can rise on corporate data center spending. Many households judge the economy by what groceries, gas and energy cost. NPR notes that energy costs tied to the conflict with Iran add to the pressure 2.
Next, the Commerce Department will issue two more estimates of third-quarter growth, and the Fed meets again in December 12.
The Record
Sources
- AP, “US economy grows at brisk 3.4% pace in third quarter on strong consumer spending and AI investment” (2026-10-29). news4jax.com/business/2026/10/29/us-economy-grows-at-brisk-3
- NPR, “With days to go before the midterms, data shows the U.S. economy is doing well” (2026-10-29). wlrn.org/npr-breaking-news/2026-10-29/with-days-to-go-before
- Yahoo Finance, “US GDP accelerates to 3.4% in the third quarter, giving Trump a messaging boost on eve of midterms” (2026-10-29). finance.yahoo.com/economy/article/us-gdp-accelerates-to-34-i
- Fox Business, “Dems call Trump 'a total failure' over inflation as White House cites economic growth” (2026-10-14). foxbusiness.com/politics/dems-call-trump-a-total-failure-ove
Found an error? Tell the newsroom. Corrections are noted at the top of the story.
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