U.S. Economy Grows at 3.4% in Third Quarter Despite Inflation

The United States economy expanded at an annual rate of 3.4% from July through September, according to data released by the Commerce Department on Thursday. This growth outpaced the 2.2% annual pace recorded in the previous quarter. The acceleration was primarily fueled by increased consumer spending and substantial capital expenditures by artificial intelligence firms.

Technology companies continued to allocate significant funds toward the construction of data centers and the development of new software capabilities. These investments represented a major component of the third quarter’s economic output. Alongside corporate spending, household consumption remained a key driver of growth. Higher-income earners, who possess greater financial resilience against persistent inflation, contributed disproportionately to this spending increase.

The positive economic indicators arrived just days before the midterm elections. Many voters express concern about the rising cost of daily necessities, a trend exacerbated by energy price spikes linked to the ongoing conflict with Iran. Despite the aggregate growth in GDP, economists note that the benefits have not distributed evenly across income levels. Lower-income households continue to face tighter budgets, as wage growth has lagged behind price increases.

Siri Steven, a manager at a resale store in Decorah, Iowa, described the strain on her household finances. She stated that she and her husband have postponed repairs on their 130-year-old home. "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 family operates on a paycheck-to-paycheck basis, a pattern reflected in national data showing the personal saving rate fell to 3.8% in September, down from 4.1% in August.

Inflation remained above the central bank’s preferred level. Prices rose 3.6% in September compared to the same period a year earlier, exceeding the Federal Reserve’s 2% target. The Fed closely monitors these figures when determining the path for benchmark interest rates. On Wednesday, the central bank decided to hold rates steady. However, the higher-than-expected September inflation data has increased pressure on policymakers to consider a rate hike at their December meeting.

Mark Zandi, chief economist at Moody’s Analytics, characterized the current economic state as fragile. He noted that businesses and consumers are adjusting to various government policies, including tariffs and the war in 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."