Economic Data: GDP growth accelerates to 3.4% ahead of midterms

The U.S. economy expanded at an annual rate of 3.4 percent from July through September, according to the Commerce Department. This figure marks a notable acceleration from the 2.2 percent growth recorded in the preceding quarter. The data was released on Thursday, just days before the midterm elections.

Investments in artificial intelligence served as a primary engine for the third-quarter surge. Companies in the sector continued to construct data centers and allocate substantial capital to technology development. Consumer spending also contributed heavily to the growth, with higher-income Americans leading the trend. These households appear better positioned to absorb the costs of persistent inflation compared to lower-income families.

The timing of the report coincides with a period of economic uncertainty for many voters. While aggregate numbers show strength, individual experiences vary widely. Wage growth has lagged behind the rise in prices, squeezing household budgets for many Americans. The ongoing conflict with Iran has further elevated energy costs, including gasoline, adding to the pressure on day-to-day expenses.

Siri Steven, a manager at a resale store in Decorah, Iowa, described her family’s financial constraints. She said the couple has postponed repairs on their 130-year-old home. "We barely go out to eat now," Steven stated. "I really have to be mindful of our budget and make sure that we can pay all our bills and not overdraft." Her family is currently living paycheck to paycheck, a reality reflected in national data showing the personal saving rate fell to 3.8 percent in September, down from 4.1 percent in August.

Inflation remains above the central bank's target. Prices increased 3.6 percent in September compared to the same month a year earlier. The Federal Reserve monitors this measure closely when determining its benchmark interest rates. The central bank held rates steady on Wednesday, but the latest price data has increased pressure on policymakers to raise rates at their next meeting in December.

Mark Zandi, chief economist at Moody's Analytics, cautioned that the current growth trajectory is delicate. He attributed the fragility to businesses and consumers adjusting to administration policies, including tariffs and the war 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."

The Commerce Department's next report on economic activity is scheduled for the end of the fourth quarter. The Federal Reserve’s policy decision is expected in December.