GDP Grows 3.4% Ahead Of Midterms

The U.S. economy grew at a 3.4% annual rate from July through September, up from a 2.2% pace in the prior quarter, according to a Commerce Department report released Thursday. The report lands days before midterm elections.

Growth was driven by consumer spending and investments from AI companies building out data centers and developing the technology. Spending gains were concentrated among higher-income Americans, who are better positioned to absorb inflation that remains above target.

Prices rose 3.6% in September compared with a year earlier, above the Federal Reserve's 2% target. The personal saving rate fell to 3.8% in September from 4.1% in August, the Commerce Department reported.

The Federal Reserve held its benchmark interest rates unchanged Wednesday, though Thursday's price reading adds pressure for action at the December meeting. Wage growth has trailed inflation, and lower-income households report more strain than high earners.

Siri Steven, a manager at a resale store in Decorah, Iowa, said she and her husband are deferring repairs on their house, which is more than 130 years old. "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."

Mark Zandi, chief economist at Moody's Analytics, said businesses and consumers are working around administration policies including tariffs and the U.S. war against 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."