Economy Grows at 3.4% Ahead of Midterms

The U.S. economy expanded at a 3.4% annual rate from July through September, according to a report released Thursday by the Commerce Department. This pace outpaced the 2.2% growth recorded in the previous quarter. The data arrived days before the midterm elections, a period when many voters report feeling pessimistic about their financial standing despite the official metrics.

Investments in artificial intelligence served as a primary engine for this growth. AI firms continued heavy spending on data center construction and technology development. Consumer spending also contributed to the total, driven largely by higher-income households that retain the ability to absorb persistent inflation costs.

The gains have not distributed evenly across all income levels. Lower-income Americans face greater strain as wage growth lags behind rising prices. In Decorah, Iowa, Siri Steven, a resale store manager, stated that her family operates on a paycheck-to-paycheck basis without building savings. She noted that the couple has delayed repairs on their 130-year-old home and rarely dine out to avoid overdrafting their accounts.

The personal saving rate for the United States fell to 3.8% in September, down from 4.1% in August, the Commerce Department reported. Prices increased by 3.6% in September compared to the same month last year. This rate exceeds the Federal Reserve's 2% target, a metric the central bank monitors closely when setting benchmark interest rates.

The Federal Reserve decided to hold rates steady on Wednesday. Thursday's inflation figures add pressure for a potential rate hike at the next meeting in December. Mark Zandi, chief economist at Moody's Analytics, described the current growth as fragile. He pointed to the need for businesses and consumers to adjust to Trump administration policies, including tariffs and the conflict with Iran.

"We are growing," Zandi said. "The economy is moving forward but it is a very, very fragile growth. It doesn't feel like we are kicking it in on all cylinders."