US economy grows 3.4% in third quarter, beating forecasts as AI investment surges
The US economy expanded at a 3.4 per cent annual rate in the third quarter, faster than expected, as business investment in AI equipment and resilient consumer spending drove growth, the Bureau of Economic Analysis said.
The US economy grew faster than expected in the third quarter of 2026, expanding at an annual rate of 3.4 per cent as businesses poured money into artificial intelligence equipment and consumers kept spending, according to the advance estimate released by the Bureau of Economic Analysis on Thursday.
The 3.4 per cent pace was an acceleration from the second quarter's 2.2 per cent and above the roughly 3.1 to 3.2 per cent that economists had forecast. In current dollars, GDP rose at a 5.6 per cent rate. The BEA said the increase reflected gains in investment, consumer spending and government spending, partly offset by a decrease in exports, while imports - which subtract from GDP - increased.
Investment was the standout. Gross private domestic investment jumped 19.4 per cent, with equipment spending up 20.9 per cent; investment overall contributed 3.27 percentage points to growth, and information processing equipment alone added 0.86 points, underlining the scale of the AI build-out. Consumer spending rose 3.8 per cent, government spending increased 5.3 per cent, exports fell 5.7 per cent and imports climbed 19.7 per cent. Real final sales to private domestic purchasers - a closely watched measure of underlying demand - rose 4.9 per cent.
The price picture was mixed. The PCE price index rose at a 2.1 per cent annual rate in the quarter, down from 5.0 per cent in the second quarter, but on a year-on-year basis September PCE inflation accelerated to 3.6 per cent, keeping price pressure in focus for the Federal Reserve.
Peter Earle, senior director of research at the American Institute for Economic Research, said the combination of the year's strongest growth and stubborn inflation "strongly suggests genuine underlying momentum" but will complicate the Fed's policy decisions in the months ahead. The BEA's second estimate of third-quarter GDP, including corporate profits, is due on 25 November.
This post is market news information only, not financial advice.
