Catenaa, Thursday, October 29, 2026- The US economy picked up more than expected in the third quarter, driven by resilient consumer spending and AI-fueled business investment.
Gross domestic product rose at a 3.4% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said, Reuters reported.
Economists polled by Reuters had forecast GDP advancing at 3.2%. Estimates ranged from 1.0% to 4.2%.
GDP measures the total value of goods and services produced by an economy. Comparing current data with the prior quarter and the previous year lets analysts gauge the overall health of the U.S. economy and its individual sectors.
Compared to the second quarter, the 3.4% expansion over the last three months “primarily reflected an acceleration in investment and an upturn in government spending,” the department said. It added that a downturn in exports partially offset the gains.
The reading released October 29 also exceeded the department’s latest estimate of 2.2% GDP growth in the second quarter of 2026 and marks the fastest growth since the third quarter of 2025.
The economy’s latest expansion exceeded the approximately 2% long-term sustainable growth rate estimated by some Federal Reserve policymakers, potentially complicating efforts to contain inflation.
The US Federal Reserve kept its benchmark interest rate in the 3.75%-4.00% range on Wednesday, acknowledging elevated inflation and signaling a December hike.
According to Reuters, Fed Chairman Kevin Warsh told reporters “economic activity is expanding at a strong pace,” noting that “while uncertainty remains, owing in part to geopolitical developments, domestic spending has been resilient.”
Meanwhile, Consumer spending, which accounts for more than two-thirds of the economy, increased at a 3.8% pace in the July-September quarter after growing at a 3.8% rate in the second quarter.
Consumer demand has remained relatively strong despite slower employment growth. Limited job losses have helped households maintain expenditure, although inflation has eroded the purchasing power of wage increases.
Reuters reported that households also have been saving less and dipping into their nest eggs to fund spending.
“With average gasoline prices still above $4 a gallon as the US-Israeli war with Iran drags on, economists anticipated a slowdown in consumer spending,” Reuters report said.
