Q3 GDP Hits 3.4% Before Midterms

The U.S. economy expanded at an annual rate of 3.4% from July through September, marking a sharper increase than the 2.2% pace recorded in the previous quarter. The Commerce Department released these figures on Thursday, just days before the midterm elections.

Investments in artificial intelligence and consumer spending served as the primary drivers of this growth. AI firms continued to spend heavily on data center construction and technology development. On the consumer side, spending remained steady, though it was concentrated among higher-income households.

Affluent Americans have demonstrated a greater ability to absorb the costs of inflation compared to lower-income groups. Wage growth has lagged behind price increases, creating financial pressure for many households. The personal saving rate in the U.S. stood at 3.8% in September, a decrease from 4.1% in August.

Siri Steven, a manager at a resale store in Decorah, Iowa, described her family's financial caution. She and her husband are delaying repairs on their home, which is more than 130 years old. "We barely go out to eat now," Steven said. "I really have to be mindful of our budget and make sure that we can pay all our bills and not overdraft."

Her household operates on a paycheck to paycheck basis, reflecting the broader trend of diminished savings. Inflation remained stubbornly high, with prices rising 3.6% in September compared to the same period in the prior year. This rate exceeds the Federal Reserve's 2% target.

The Federal Reserve held its benchmark interest rates steady on Wednesday. The stronger than expected inflation data adds pressure for the central bank to consider a rate increase at its next meeting in December.

Mark Zandi, chief economist at Moody's Analytics, cautioned that the growth figures mask underlying fragility. He noted that businesses and consumers are adjusting to administration policies, including tariffs and the U.S. war against Iran. "We're growing," Zandi said. "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."