GDP grows to 3.4% in Q3 as AI spending and consumer outlays rise

Economic data released Thursday shows the U.S. economy expanded at a faster rate in the summer months than it did in the spring. The Commerce Department reported that gross domestic product grew at an annual rate of 3.4% from July through September. This figure marks an increase from the 2.2% annual pace recorded in the previous quarter.

Investments in artificial intelligence served as a primary engine for this growth. Tech companies continued to spend heavily on the construction of data centers and the development of new technologies. Consumer spending also contributed significantly to the expansion. Higher-income households drove much of this activity, as these groups possess greater financial resilience against persistent price increases.

The strong growth figures arrive days before the midterm elections. Many voters report feeling pessimistic about their personal finances. This sentiment stems from high inflation affecting the cost of daily necessities and rising energy prices linked to the ongoing conflict with Iran. While aggregate spending is up, the benefits have not reached all households equally. Lower-income Americans face tougher economic conditions than their wealthier counterparts.

Wage growth has trailed inflation, squeezing household budgets for many families. The personal saving rate fell to 3.8% in September, down from 4.1% in August, according to the Commerce Department. Prices rose 3.6% in September compared to the same month last year. This rate exceeds the Federal Reserve's 2% target for inflation.

The Federal Reserve decided on Wednesday to hold its benchmark interest rates steady. The new inflation data adds pressure on the central bank to consider a rate hike at its next meeting in December. The Fed monitors the Commerce Department's inflation metrics closely when setting monetary policy.

Economists remain cautious about the durability of this growth. Mark Zandi, chief economist at Moody's Analytics, described the current economic environment as fragile. He noted that businesses and consumers are adjusting to policies from the Trump Administration, including tariffs and the war with Iran. Zandi stated, "We're growing. The economy is moving forward but it's a very, very fragile growth. It doesn't feel like we're kicking it in on all cylinders."