U.S. GDP Grew at 3.4% Annual Rate in Third Quarter, Commerce Data Shows

The U.S. economy expanded at a 3.4% annual rate from July through September, up from a 2.2% pace in the prior quarter, according to a Commerce Department report released Thursday. The data arrives days before the midterm elections.

Consumer spending and investment by AI companies building data centers and developing the technology were cited as drivers of third-quarter growth. Growth in spending has concentrated among higher-income Americans, who are better positioned to absorb persistent inflation.

Prices rose 3.6% in September compared with a year earlier, above the Federal Reserve's 2% target. The personal saving rate fell to 3.8% in September from 4.1% in August, according to a separate Commerce Department report. Wage growth has trailed inflation.

The Federal Reserve held its benchmark interest rates steady on Wednesday. The central bank faces pressure to raise rates at the December meeting following Thursday's price readings.

Mark Zandi, chief economist at Moody's Analytics, said growth is fragile as businesses and consumers contend with tariffs and the U.S. war against Iran. "We're growing," Zandi said. "The economy is moving forward but it's a very, very fragile growth. It doesn't feel like we're kicking it in on all cylinders."

Siri Steven, a manager at a resale store in Decorah, Iowa, said she and her husband are postponing repairs to their more than 130-year-old house. "We barely go out to eat now," Steven said. "I really have to be mindful of our budget and make sure that we can pay all our bills and not overdraft." Her family lives paycheck to paycheck with no savings.

The conflict with Iran has raised gasoline costs, and many Americans report feeling gloomy about the economy as everyday costs climb.