Third-Quarter Growth: AI Investment and Consumer Spending Drive Economy

The Commerce Department reported on Thursday that the U.S. economy expanded at an annual rate of 3.4% from July through September. This figure represents a notable acceleration from the previous quarter, when gross domestic product grew at a 2.2% annual pace.

Strong investment in artificial intelligence emerged as a primary driver of this growth. Tech companies continued to build out data centers and allocate substantial capital toward technology development. Consumer spending also contributed significantly to the expansion, particularly among higher-income households that have shown greater resilience against persistent inflation.

This economic data arrives days before the midterm elections. Many voters express concern over rising costs for daily necessities and increased energy prices linked to the ongoing conflict with Iran. Despite the strong GDP figures, wage growth has lagged behind inflation, squeezing household budgets. The personal saving rate dropped to 3.8% in September, down from 4.1% in the prior month.

Siri Steven, a manager at a resale store in Decorah, Iowa, described the pressure on her family. She and her husband are delaying 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 household operates on a paycheck-to-paycheck basis, reflecting the wider struggle for lower-income Americans.

Inflation rose 3.6% in September compared to the same period last year. This rate exceeds the Federal Reserve's 2% target. The central bank decided on Wednesday to hold interest rates steady. However, Thursday's higher-than-expected price data has increased pressure on the Fed to consider raising rates at its next meeting in December.

Mark Zandi, chief economist at Moody's Analytics, characterized the current growth as delicate. He noted that businesses and consumers are adjusting to Trump administration policies, including tariffs and the war 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."