The U.S. economy picked up speed during the summer, supported by consumer spending and investment in artificial intelligence, according to Commerce Department figures released Thursday. The report arrived days before the midterm elections, highlighting a gap between solid national growth and the financial pressures weighing on many Americans.
Gross domestic product, a broad measure of economic activity, expanded at an annual rate of 3.4% from July through September. That was an increase from the 2.2% annual pace recorded in the previous quarter. AI companies contributed substantially to the stronger performance as they continued building data centers and spending heavily on developing the technology.
Household spending also helped propel the expansion, with higher-income Americans partly driving those gains. Those consumers have been better positioned to absorb persistent inflation. Although spending has risen steadily overall, the strength has been uneven across households, with lower-income Americans facing greater difficulties than higher earners.
For many Americans, the growth figures have done little to ease a gloomy view of the economy. Inflation continues to push up the price of everyday necessities, while the ongoing conflict with Iran has increased energy costs, including gasoline. Wages have also failed to keep pace with inflation, adding to the squeeze on household finances.
In Decorah, Iowa, resale store manager Siri Steven said she and her husband were delaying improvements to their house, which is more than 130 years old. Dining out has become rare, and she said careful budgeting was necessary to cover bills without overdrawing their account. Her family has been living paycheck to paycheck and has been unable to save.
A separate Commerce Department report showed the national personal saving rate fell to 3.8% in September from 4.1% in August. Prices in September were 3.6% higher than a year earlier, exceeding the Federal Reserve's 2% inflation target. The central bank closely follows that measure when making decisions about its benchmark interest rates.
The Fed chose not to raise rates Wednesday. Thursday's inflation reading added pressure for an increase at its next meeting in December.
Economists also expressed concern about the country's longer-term fiscal health. Mark Zandi, chief economist at Moody's Analytics, described growth as fragile despite the strong GDP results. He pointed to the challenges businesses and consumers face in navigating Trump administration policies, including tariffs and the U.S. war against Iran. The economy is advancing, he said, but its momentum remains delicate.
