US Economy Grew 3.4% in Third Quarter, Topping Forecasts as Consumer Spending and AI Investment Held Up
The Commerce Department's advance estimate put third-quarter growth at a 3.4% annual rate, above the 3.2% economists expected, with consumer spending rising 3.8% and business investment in AI projects providing support even as higher oil prices weighed on households.
WASHINGTON: The United States economy grew at a 3.4% annual rate in the third quarter, the Commerce Department’s Bureau of Economic Analysis said Thursday in its advance estimate, a pace faster than the 3.2% economists polled by Reuters had expected.
Growth picked up from 2.2% in the second quarter. Consumer spending, which accounts for more than two-thirds of economic activity, rose at a 3.8% pace, the same rate as in the prior quarter, according to Reuters. Spending by businesses on artificial intelligence projects, including data center construction, also supported growth.
Spending held up as oil prices rose
The gain came even as higher oil prices tied to the conflict in the Middle East weighed on households, Reuters reported. Average gasoline prices remained above $4 a gallon, and Reuters said economists expected consumer spending to slow as households saved less and drew on savings to fund purchases.
A separate Commerce Department report cited by NPR put the personal saving rate at 3.8% in September, down from 4.1% in August, and said prices rose 3.6% from a year earlier, above the Federal Reserve’s 2% target.
A report landing days before the midterms
The report arrived less than a week before Tuesday’s midterm elections, which will decide control of Congress, Reuters noted. The headline growth figure sat in contrast to downbeat household sentiment, Reuters reported.
Federal Reserve Chair Kevin Warsh told reporters that “economic activity is expanding at a strong pace,” while adding that uncertainty remained, in part because of geopolitical developments, and that domestic spending had been resilient, according to Reuters. The central bank on Wednesday left its benchmark interest rate in the 3.75% to 4.00% range, while saying inflation remained elevated.
Mark Zandi, chief economist at Moody’s Analytics, told NPR: “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.” He pointed to tariffs and the war with Iran as pressures businesses and consumers had to navigate, NPR reported.
Reporting based on coverage by Reuters and NPR.
