Economy Grew at 3.4% in Third Quarter Despite Inflation

The U.S. economy expanded at an annual rate of 3.4% from July through September, the fastest growth recorded in the most recent quarters. This figure exceeds the 2.2% pace seen in the previous quarter, according to a report from the Commerce Department released on Thursday.

The acceleration in economic activity stems primarily from two factors. AI companies continued to pour capital into building data centers and developing new technology. At the same time, consumer spending rose, fueled largely by higher-income Americans who have more financial cushion to absorb rising costs.

This data arrives just days before the midterm elections. While the aggregate numbers look strong, many voters report feeling pessimistic about their personal finances. Inflation has increased the price of daily necessities, and energy costs remain elevated due to the ongoing conflict with Iran.

The benefits of this growth have not been shared equally across all households. Lower-income Americans are struggling more than high earners as wage growth lags behind price increases. The personal saving rate for the United States fell to 3.8% in September, down from 4.1% in August.

Siri Steven, a manager at a resale store in Decorah, Iowa, described her family's financial position. She and her husband have put off repairs on their home, which is more than 130 years old. Steven noted that they rarely eat out and must carefully monitor their budget to avoid overdrafting their accounts.

Prices rose 3.6% in September compared to the same month last year, according to the Commerce Department. This rate exceeds the Federal Reserve's 2% target. Although the central bank decided not to raise interest rates on Wednesday, the new inflation data adds pressure for a hike at the December meeting.

Mark Zandi, chief economist at Moody's Analytics, cautioned that the solid GDP figures mask underlying fragility. He stated that businesses and consumers are adjusting to tariffs and the war with Iran. Zandi described the current economic state as moving forward but not operating at full capacity.