US GDP beats forecasts, hitting 3.4% growth rate ahead of midterms

Households in the United States spent more than economists predicted, helping the nation's economy expand faster than most forecasts suggested. The Bureau of Economic Analysis reported on Thursday that gross domestic product grew at an annualized rate of 3.4% during the third quarter. This result surpassed the 3.2% pace projected by economists polled by Reuters. The range of estimates for the quarter was wide, stretching from 1% to 4.2%.

The economy has been growing at a speed well above the 2% threshold that some Federal Reserve officials consider safe for avoiding inflation. On Wednesday, the central bank kept its benchmark interest rate between 3.75% and 4%. The bank noted that inflation remains high despite the strong growth numbers.

Consumer spending was the main driver of the recent economic activity. This sector, which makes up more than two-thirds of the economy, grew at a 3.8% rate from July to September. That matches the growth seen in the second quarter. Low layoff rates and steady hiring have helped support this spending, even though wage increases have sometimes lagged behind rising prices.

Business investment in artificial intelligence also contributed to the strong numbers. Tech companies borrowed large amounts of money over the past year to fund these projects. Some economists caution that this heavy reliance on AI spending may not reflect the true state of the broader economy. They point to the uncertain payoff on these long-term projects as a potential risk for future equipment spending.

The new data releases less than a week before Tuesday's midterm elections. The results will determine which party controls Congress. The strong growth figures stand in contrast to recent polling, which shows Donald Trump holding record-low approval ratings. Consumer sentiment has also deteriorated sharply in recent months.

Kevin Warsh, the Federal Reserve chairman, told reporters that economic activity is expanding at a strong pace. He added that domestic spending has remained resilient despite uncertainty from geopolitical developments. Economists generally expect the Fed to raise rates in December.

Gasoline prices remain above $4 a gallon as the conflict between the US, Israel, and Iran continues. Households are saving less and using their savings to pay for goods and services. Analysts anticipate this spending pattern could slow down in the coming months.