US GDP Hits 3.4% Ahead of Midterms as AI Spending Fuels Growth

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 marks a sharp acceleration from the previous quarter, when the gross domestic product grew at a 2.2% annual pace. The increase comes just days before midterm elections, a timing that contrasts with the pessimistic views many Americans hold regarding their personal finances.

Corporate investment in artificial intelligence served as a primary engine for the third-quarter expansion. AI firms continued to spend heavily on constructing data centers and developing new technologies. Consumer spending also contributed to the rise, though the growth was uneven. Higher-income households, which face less pressure from persistent inflation, drove a notable portion of the spending increase.

Siri Steven, a manager at a resale store in Decorah, Iowa, illustrates the squeeze on lower-income families. She stated that she and her husband are delaying repairs on their 130-year-old home. "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 operates on a paycheck-to-paycheck basis, a trend reflected in national saving rates.

The personal saving rate for the United States fell to 3.8% in September, down from 4.1% in August. Wage growth has also lagged behind price increases. Inflation rose 3.6% in September compared to the same month last year, exceeding the Federal Reserve's 2% target. This figure places additional pressure on the central bank to consider raising interest rates at its next meeting in December, despite its decision to hold rates steady on Wednesday.

Mark Zandi, chief economist at Moody's Analytics, characterized the current economic trajectory as fragile. He noted that businesses and consumers are adjusting to administration policies, including tariffs 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."