U.S. Economy Grows 3.4% in Third Quarter, Beating Forecasts

The U.S. economy grew at a 3.4% annualized pace in the third quarter of 2026, beating forecasts and accelerating sharply from the spring, according to the advance estimate released Thursday by the Commerce Department’s Bureau of Economic Analysis.

The Bureau of Economic Analysis said real gross domestic product rose at an annual rate of 3.4% from July through September, up from 2.2% in the second quarter. Economists surveyed by Dow Jones had expected growth of 3.1%, CNBC reported, while a Reuters survey of economists had forecast 3.2%.

Third-quarter U.S. GDP increases a better-than-expected 3.4% as September inflation accelerates https://t.co/vHD5EZQUAc

— CNBC (@CNBC) October 29, 2026

The agency said the gains came from increases in investment, consumer spending and government spending, partly offset by a decline in exports. Imports, which are subtracted when GDP is calculated, rose during the quarter, the Bureau of Economic Analysis said.

AI investment and shoppers carried the quarter

The Associated Press reported that the faster pace was lifted by consumer spending and investment tied to artificial intelligence. Ahead of the release, Reuters reported that business spending on equipment linked to the AI boom was expected to post a third straight quarter of double-digit growth, and that a record surge in imports of capital goods had widened the trade deficit, which economists estimated would subtract at least 4 percentage points from growth.

Reuters also reported that historically low layoffs and moderate hiring have helped support consumer spending, which accounts for more than two-thirds of the U.S. economy.

Inflation is still running hot

The same Commerce Department release showed price pressures picking up. The personal consumption expenditures price index, the inflation gauge the Federal Reserve watches most closely, rose 0.5% in September and 3.6% from a year earlier, CNBC reported. The monthly figure matched the Dow Jones consensus, and the annual rate came in 0.1 percentage point below it, according to CNBC.

Core PCE, which strips out food and energy, rose 0.3% for the month and 3.1% for the year, in line with forecasts, CNBC reported. Both readings remain well above the Fed’s 2% target.

The Federal Reserve on Wednesday left its benchmark interest rate in a range of 3.75% to 4.00% while noting that inflation is still elevated, Reuters reported. Reuters noted that the economy is expanding well above the roughly 2% pace some Fed officials consider consistent with stable prices.

A strong number five days before the midterms

The report lands less than a week before Tuesday’s midterm elections, which will decide control of Congress, Reuters noted. The data hands the Trump administration a strong growth headline heading into Election Day, though Reuters also reported that it stands in contrast to households’ downbeat view of the economy, reflected in weak consumer sentiment readings and the president’s approval numbers.

For voters, the two halves of Thursday’s report point in different directions: the economy is producing more, but prices are still rising faster than the Fed wants. How much credit the growth figure earns may depend on whether paychecks keep pace with the cost of living.

Thursday’s figure is an advance estimate and will be revised. The Bureau of Economic Analysis said its next GDP release is scheduled for Nov. 25.

Sources

• U.S. Bureau of Economic Analysis, GDP advance estimate, third quarter 2026
• CNBC, “Third-quarter U.S. GDP increases a better-than-expected 3.4% as September inflation accelerates”
• Associated Press, “The US economy grew at a faster 3.4% pace from July through September”
• Reuters, third-quarter GDP preview, Oct. 29, 2026

Reporting by Daily Beltway.