Compiled from reports by ABC News and ColoradoBiz. See the original articles linked below.
The US economy expanded at an annualized rate of 3.4% in the third quarter, according to an initial estimate from the Commerce Department published on October 29. ABC News reported that the figure was up from 2.2% in the previous quarter and above what economists had expected. ColoradoBiz, carrying a report by Lucia Mutikani of Reuters, described it as the fastest pace in a year.
What economists had expected
The two outlets cite different forecasts. ABC News said economists had anticipated growth of 3.1%, while the Reuters report published by ColoradoBiz put the forecast at 3.2%. Both agree that the actual result came in higher.
Spending and investment
ABC News attributed the acceleration mainly to stronger consumer spending and higher investment, including money put into artificial intelligence. It added that imports of chips connected to AI may have pulled the headline number down.
The Reuters report said consumer spending grew 3.8%, the same pace as in the second quarter, helped by low layoffs and moderate hiring, even as households saved less and drew on savings. Spending on business equipment jumped 20.9%, which Reuters described as the fastest rate since 2020 and linked to AI. Government spending rose 5.3%. Residential investment fell, which the report tied to higher mortgage rates stemming from the conflict in the Middle East. Imports subtracted 2.64 percentage points from growth, according to the report, but strong spending and a rebuilding of inventories more than made up for that.
Inflation and the Federal Reserve
ABC News reported that inflation has climbed since the Iran war started in late February, with prices in September 3.7% higher than a year earlier, well above the Fed's 2% goal. Reuters, via ColoradoBiz, gave the 12-month rise in the PCE price index through September as 3.6%, with the core measure at 3.1%. The report also said gasoline remained above $4 a gallon and that household disposable income, adjusted for inflation, fell 0.3% in September.
The Federal Reserve left its benchmark rate in a range of 3.75% to 4.00% this week. ABC News said the central bank had raised rates by a quarter-point the previous month, and that markets saw about an 85% chance of another increase in December. It quoted Fed Chair Kevin Warsh as saying economic activity is expanding at a strong pace. The Reuters report said the central bank acknowledged that inflation remains elevated, and that economists viewed the growth and price data as supporting a possible December hike.
Jobs and later revisions
According to ABC News, hiring continues to grow, though more slowly, and unemployment remains low by historical standards. The outlet noted that the third-quarter number is a first estimate and will be revised as more data arrives.
The Reuters report said economists expect growth to slow by the end of the year.
Sources
- US economy grew more than expected in 3rd quarter, government data shows (ABC News, 2026-10-29)
- US economy grows 3.4% in third quarter led by consumer spending and AI investment (ColoradoBiz, 2026-10-29)
This article was compiled with AI assistance from the reports listed above and reviewed by GMA before publishing.