Commerce data shows US GDP grew 3.4% in third quarter

The US economy expanded at a 3.4% annualized rate in the third quarter, according to the Bureau of Economic Analysis. The Commerce Department released this advance estimate on Thursday. The figure exceeded the 3.2% growth rate predicted by economists polled by Reuters.

This growth rate marks a sharp departure from previous expectations. Forecasts for the quarter had spanned a wide range, from 1% to 4.2%. The strong performance comes despite higher oil prices linked to the conflict in the Middle East. Resilient consumer spending and business investment in artificial intelligence offset those costs.

The report arrived less than one week before the midterm elections on Tuesday. Voters will decide control of Congress. Public opinion on the economy has been negative, reflected in President Donald Trump's low approval ratings and falling consumer sentiment. The data contrasts with that household-level pessimism.

The Federal Reserve left its benchmark interest rate in the 3.75% to 4% range on Wednesday. Officials noted that inflation remains elevated. The current expansion rate exceeds the roughly 2% level that some Fed officials view as non-inflationary. Markets expect the central bank to raise rates in December.

Fed Chair Kevin Warsh told reporters that economic activity is expanding at a strong pace. He said domestic spending has been resilient despite geopolitical uncertainty. He acknowledged that uncertainty remains, partly due to developments abroad.

Consumer spending, which makes up more than two-thirds of economic activity, grew at a 3.8% pace in July through September. This matches the rate from the second quarter. Low layoffs and moderate hiring support this spending, even as wage gains have sometimes lagged inflation.

Households are saving less and drawing down savings to maintain their spending levels. Average gasoline prices remain above $4 a gallon as the war with Iran continues. Some economists question whether the GDP figure reflects the true state of the economy, citing the heavy reliance on AI-related borrowing and uncertain payoffs.