Economic growth stays resilient as GDP expands 3.4% in Q3

The US economy picked up speed in the July-September quarter as businesses increased investments and resilient consumers continued to spend despite rising inflation.

Data released by the Bureau of Economic Analysis on Thursday showed that the economy expanded at an annualized rate of 3.4%, up from 2.2% in the previous quarter. The figure also exceeded economists’ forecast of 3.1%.

A surge in business investment provided a major boost, with companies increasing investment by 12.7%. Much of this spending came from the rapid expansion of AI infrastructure. A wave of data center investments by AI hyperscalers helped drive a 20.9% rise in equipment purchases.

Meanwhile, consumer spending rose 3.8%, marking the fastest pace since 2024.

However, the AI boom also dragged on GDP growth. Many AI hardware components, such as computer chips, were imported, adding to the US trade deficit and reducing GDP. Higher mortgage rates also put a damper on homebuilding.

The latest figures arrive just before the US midterm elections, giving President Donald Trump and his Republican allies fresh economic data to highlight as they campaign for voters’ support.

Trump welcomed the report, calling the growth figures encouraging. The White House also celebrated the results.

Despite the strong headline figure, economists cautioned that the economy still faces challenges. Heavy reliance on AI-related investment and continued pressure from international trade could affect growth in the coming quarters.

Low unemployment has offered little relief as inflation continues to eat into income gains. Prices rose faster in September, according to the Fed’s preferred inflation gauge, with annual inflation still well above its 2% target.

The latest performance highlights strong domestic demand but also raises questions about how long the momentum will last.