US economy grows faster-than-expected 3.4%, most in a year

The US economy expanded in the third quarter at the fastest pace in a year, supercharged by feverish business investment and a resilient American consumer.

Inflation-adjusted gross domestic product increased an annualized 3.4% in the three months through September after growing 2.2% in the second quarter, according to an initial estimate issued Thursday by the Bureau of Economic Analysis. The rise in GDP beat the 3.2% median projection in a Bloomberg survey of economists.

The world’s largest economy continued to be energized by vibrant business spending, largely tied to investment in artificial intelligence. Outlays for equipment contributed more to GDP in the third quarter than at any time since 2011 outside of the pandemic rebound.

Household spending was similarly robust, increasing an annualized 3.8% for a second straight quarter, even amid historically low consumer sentiment tied to cost-of-living concerns.

The report is the last major reading on the health of the US economy before next week’s midterm elections. The results will determine who controls Congress for President Donald Trump’s final two years in office, with many campaigns targeting concerns around affordability and high prices.

Business investment climbed an annualized 12.7%, the most since 2020. Information processing equipment and industrial equipment outlays both surged.

Net exports subtracted 3.3 percentage points from the calculation of third-quarter GDP, the most since early last year. That likely reflected a mix of factors, including a surge in imports — especially equipment for data centers — as well as efforts to get goods into the US ahead of tariffs and supply-chain disruptions. Inventories, however, added 1.6 percentage points to growth.

Meanwhile, separate figures from the agency showed inflationary pressures mounted in September. The personal consumption expenditures price index — the Federal Reserve’s preferred measure — rose 0.5% last month, the most since March. Excluding food and energy, the so-called core gauge advanced 0.3%.

That data also showed real personal spending stalled as the third quarter drew to a close. Inflation-adjusted spending on goods and services was little changed in September after an outsize increase the month before.

The Middle East conflict and the Russia-Ukraine war have pushed prices for fuel and other goods higher, weighing on consumer sentiment. The Trump administration’s tariffs are also making some goods more expensive.