Summer GDP Growth Reaccelerates

The U.S. economy expanded faster in the third quarter than in the previous period, according to data released by the Commerce Department on Thursday. Gross domestic product grew at an annual rate of 3.4% from July through September. This figure surpasses the 2.2% annual pace recorded in the spring.

Two primary factors fueled this acceleration. AI companies continued to invest heavily in building data centers and developing new technology. Consumer spending also rose, a trend led by higher-income Americans who possess greater financial resilience against persistent inflation.

The timing of the report places it days before the midterm elections. Many voters report feeling pessimistic about their personal finances, citing high costs for daily necessities. The ongoing conflict with Iran has also driven up energy prices, including gasoline.

Siri Steven, a manager at a resale store in Decorah, Iowa, illustrates the strain on middle-class budgets. Her family is delaying repairs on their home, which is more than 130 years old. Steven stated that they rarely eat out and must carefully manage their budget to avoid overdrafts. Her household is currently living paycheck to paycheck without building savings.

Macro data supports this mixed picture. The personal saving rate fell to 3.8% in September, down from 4.1% in August. Prices rose 3.6% in September compared to the previous year, a rate that exceeds the Federal Reserve's 2% target. The central bank held interest rates steady on Wednesday but faces increased pressure to hike rates at its next meeting in December.

Mark Zandi, chief economist at Moody's Analytics, described the current growth as fragile. He noted that businesses and consumers must adjust to administration policies, including tariffs and the war with Iran. Zandi said the economy is moving forward but is not operating at full capacity. The data indicates a split between strong investment in specific sectors and tight constraints on typical households.