U.S. GDP accelerates to 3.4% as AI spending and consumer outlays surge

The United States economy expanded at a 3.4% annual rate from July through September, according to a Commerce Department report released Thursday. That figure marked a sharp increase from the 2.2% growth recorded in the spring quarter.

Two primary factors fueled the acceleration. Companies invested heavily in artificial intelligence, continuing to build out data centers and develop new technology. Consumer spending also rose, driven largely by higher-income Americans who can absorb the costs of persistent inflation.

The timing of the report lands just days before the midterm elections. Many voters report feeling pessimistic about their financial situation despite the top-line growth numbers. Inflation remains a central concern, with prices rising 3.6% in September from a year earlier. That rate is well above the Federal Reserve’s 2% target.

The Federal Reserve held its benchmark interest rates steady on Wednesday. However, the latest inflation data adds pressure for policymakers to consider a rate increase at their next meeting in December. The central bank closely monitors the Commerce Department’s inflation figures when making these decisions.

The benefits of the recent growth have not reached all households evenly. Lower-income families continue to face tighter constraints as wage growth has lagged behind rising prices. The personal saving rate dropped to 3.8% in September, down from 4.1% in August.

Siri Steven, a manager at a resale store in Decorah, Iowa, said she and her husband are delaying repairs on their 130-year-old home. "We barely go out to eat now," she 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 is currently living paycheck to paycheck.

Mark Zandi, chief economist at Moody's Analytics, noted that the growth feels fragile. He pointed to business and consumer caution in the face of Trump administration policies, including tariffs and the conflict with 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."