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The Bureau of Economic Analysis reported that real gross domestic product increased at an annual rate of 3.4 percent in the third quarter of 2026 after rising 2.2 percent in the prior period. The advance estimate exceeded the 3.2 percent pace that economists polled by Reuters had forecast before the data release. Consumer spending and business investment in artificial intelligence equipment served as the main drivers while a wider trade deficit subtracted from the headline figure.
Consumer spending, which represents more than two-thirds of the economy, increased at a 3.8 percent rate in the July-September quarter, matching the second-quarter pace according to the Bureau of Economic Analysis. Low layoffs and moderate hiring have continued to support household demand even as wage growth has sometimes trailed inflation. Households have also drawn down savings to maintain spending levels amid these conditions.
Business investment strengthened markedly with equipment spending surging at a 20.9 percent rate, the fastest since the third quarter of 2020, as outlays on information processing equipment tied to artificial intelligence climbed 37.4 percent. The Bureau of Economic Analysis placed non-residential fixed investment at 12.7 percent for the quarter while software investment rose 9.6 percent and research and development advanced 7.5 percent. These gains helped offset the impact of higher oil prices linked to conflict in the Middle East.
The Bureau of Economic Analysis noted that imports rose sharply at a 19.7 percent rate and subtracted 2.64 percentage points from growth while inventory accumulation added 1.61 percentage points. Real final sales to private domestic purchasers, which strips out inventories, trade and government spending, increased 4.9 percent after a 4.6 percent gain in the second quarter. Government expenditures also contributed as non-defense outlays rebounded strongly in the period.
The personal consumption expenditures price index increased 2.1 percent in the third quarter compared with a 5.0 percent rise previously while the core measure excluding food and energy rose 2.5 percent after advancing 3.3 percent, according to the Bureau of Economic Analysis. Dean Baker, senior economist at the Center for Economic and Policy Research, said the economy is growing at a decent pace but the primary factors are an AI-driven investment boom and consumption driven primarily by rising stock wealth. Baker’s assessment highlighted how these elements have sustained expansion above levels that some Federal Reserve officials consider non-inflationary.
Thursday’s advance estimate from the Bureau of Economic Analysis constitutes the first of three readings on third-quarter output with further revisions expected as additional data on trade, inventories and corporate profits are incorporated. The report arrives against a backdrop in which the economy has demonstrated resilience despite geopolitical strains affecting energy markets and persistent inflationary pressures in certain sectors. Subsequent releases will provide greater detail on the composition of growth and its implications for policy.
