Commerce data shows U.S. GDP accelerated in the third quarter

The U.S. economy expanded at a faster pace in the summer than in the spring, according to new data from the Commerce Department. Gross domestic product grew at an annual rate of 3.4% from July through September. This figure exceeds the 2.2% annual pace recorded in the previous quarter.

Two main factors fueled this increase. Companies invested heavily in artificial intelligence infrastructure, specifically building out new data centers. Consumer spending also rose, though the gains were concentrated among higher-income Americans. These households have more capacity to absorb persistent inflation compared to lower earners.

The release of this data arrived just days before the midterm elections. Public sentiment remains mixed. Many Americans report feeling pessimistic about their financial situation. High prices for daily necessities and rising energy costs due to the conflict with Iran contribute to this mood. Wage growth has not kept up with the rise in prices, squeezing budgets for many families.

Siri Steven, a manager at a resale store in Decorah, Iowa, described her household’s financial constraints. She said she and her husband are delaying repairs on their home, which is more than 130 years old. "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, with no savings accumulating.

Macro indicators reflect this strain. The personal saving rate fell to 3.8% in September, down from 4.1% in August. Inflation continued to outpace the central bank’s target. Prices rose 3.6% in September compared to the same month in the prior year. The Federal Reserve targets a 2% inflation rate.

The Federal Reserve held its benchmark interest rates steady on Wednesday. The recent price data adds pressure on policymakers to consider a rate increase at their next meeting in December. Mark Zandi, chief economist at Moody's Analytics, characterized the current growth as fragile. "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." He cited the need for businesses and consumers to adjust to tariff policies and the war in Iran as key factors in this fragility.