US economy growth reached 3.4 percent at an annual rate in the third quarter of 2026, faster than expected and up from 2.2 percent in the second quarter. The Bureau of Economic Analysis released the advance estimate at 8:30 a.m. Eastern time on October 29, 2026. US economy growth beat the 3.1 percent pace economists had forecast, according to MarketWatch, while other surveys put the forecast at 3.2 percent. In current dollars, gross domestic product grew at a 5.6 percent annual rate. At a quarterly rate, the economy expanded 0.8 percent. The report arrived less than a week before midterm elections that will decide control of Congress, and a day after the Federal Reserve left interest rates unchanged.
Investment gave the largest boost to US economy growth. Private domestic investment grew at a 19.4 percent annual rate, against 4.6 percent in the second quarter, according to detailed tables in the release. Private inventories added 1.6 percentage points to growth, led by wholesale trade and manufacturing. Business spending on equipment rose at a 20.9 percent annual rate and added 1.2 percentage points, led by information processing equipment, mainly computers and peripheral equipment tied to the data center buildout. Government spending also added to growth, mainly through federal nondefense consumption, which the agency partly linked to smaller sales of crude oil from the Strategic Petroleum Reserve than in the prior quarter.
US economy growth and consumer spending
Consumer spending, which accounts for more than two thirds of the economy, rose at a 3.8 percent pace in the July to September quarter, the same rate as in the second quarter. Spending increased for services, led by health care and by food services and accommodations, and for goods, led by prescription drugs, the Bureau of Economic Analysis said. Real final sales to private domestic purchasers, a measure of underlying private demand that strips out inventories, trade and government, rose at a 4.9 percent rate, up from 4.6 percent in the second quarter. That measure suggests demand from households and firms stayed firm even before counting the inventory buildup.
Trade was a drag on US economy growth in the quarter. Exports fell, led by petroleum products, while imports rose. The wider trade deficit knocked 3.3 percentage points off growth, MarketWatch reported. That drag partly offset the investment gain, which is why headline growth of 3.4 percent is lower than the sum of the investment and consumption contributions alone. The Bureau of Economic Analysis said US economy growth accelerated from the second quarter primarily because of faster investment and an upturn in government spending, partly offset by a downturn in exports. The advance estimate rests on incomplete source data and will be revised.
US economy growth and inflation
Inflation figures in the US economy growth release pointed in two directions. On a quarterly basis, the price index for personal consumption expenditures rose at a 2.1 percent annual rate, sharply slower than 5.0 percent in the second quarter. The core index, excluding food and energy, slowed to 2.5 percent from 3.3 percent. The broader gross domestic purchases price index rose 3.0 percent, down from 5.6 percent. Monthly data pointed the other way. The PCE price index rose 3.6 percent in September from a year earlier, up from 3.4 percent in August, while core PCE rose 3.1 percent year over year and 0.3 percent from August, against a 0.2 percent monthly gain the month before.
The difference reflects timing. Quarterly figures compare average price levels across three months on an annualized basis, while year over year readings capture the recent climb in prices, including energy. Reuters polling and MarketWatch coverage linked part of the price pressure to higher oil prices tied to conflict in the Middle East. The September personal income and outlays report, released the same day, put headline PCE inflation at 3.6 percent for the 12 months ended in September, nearly double the Federal Reserve’s 2 percent goal, MarketWatch reported. Hiring remained sluggish, MarketWatch said, even as growth and spending stayed firm.
US economy growth and interest rates
For US economy growth watchers, the Federal Reserve left its benchmark interest rate in the 3.75 percent to 4.00 percent range on October 28, while noting that inflation remains elevated. Two officials dissented in favor of an increase, according to market coverage of the decision. Federal Reserve chair Kevin Warsh told reporters that economic activity is expanding at a strong pace, and that while uncertainty remains, owing in part to geopolitical developments, domestic spending has been resilient. The economy is expanding well above the pace some Federal Reserve officials regard as the non inflationary growth rate of around 2 percent, Reuters reported. Economists expected the Fed to raise rates in December, according to that coverage.