Commerce Department: Q3 GDP Growth Hits 3.4% on AI and Consumer Spending

The U.S. economy expanded at an annual rate of 3.4% from July through September, according to a report released Thursday by the Commerce Department. This pace outstripped the 2.2% annual growth recorded in the preceding spring quarter. The acceleration comes just days before the midterm elections, a period when voters typically weigh economic conditions against current leadership.

Two primary factors fueled the third-quarter expansion. First, artificial intelligence companies continued to invest heavily in data center infrastructure and technology development. Second, household consumption provided substantial support, though this spending was concentrated among higher-income Americans. These consumers possess greater financial buffers to absorb persistent inflation, allowing them to maintain spending levels despite rising costs.

The aggregate growth figures mask disparities across income levels. Lower-income households have struggled more than high earners, with wage growth lagging behind price increases. The personal saving rate fell to 3.8% in September, down from 4.1% in August, indicating tighter budgets for many families.

Siri Steven, a manager at a resale store in Decorah, Iowa, described her household’s experience. She and her husband have postponed repairs on their 130-year-old home and reduced dining out to manage cash flow. "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 currently operates on a paycheck-to-paycheck basis without accumulating savings.

Inflation remained above the Federal Reserve’s target. Prices rose 3.6% in September compared to the same month a year earlier. The central bank held its benchmark interest rates steady on Wednesday. However, the new price data adds pressure for a rate hike at the December meeting. The Fed monitors Commerce Department inflation metrics closely when determining monetary policy direction.

Economists caution that the current growth trajectory is sensitive to external policy variables. Mark Zandi, chief economist at Moody's Analytics, noted that businesses and consumers must account for tariff policies and the ongoing conflict with 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."

The Commerce Department’s report provides a baseline for assessing economic momentum into the fourth quarter. The data confirms that investment in technology and spending by high earners are currently offsetting the drag on lower-income households.