U.S GDP Growth Accelerated to 3.4% in Third Quarter

Robust business investment and resilient consumer spending drove stronger-than-expected economic growth in the third quarter. Gross domestic product, the value of all goods and services produced across the economy, rose at a seasonally and inflation-adjusted 3.4 percent annual rate from July through September, the Commerce Department said Thursday. Government spending also increased, contributing to the acceleration from the second quarter’s 2.2 percent growth rate. Much of the increase, however, reflected an accounting effect from reduced sales of oil from the Strategic Petroleum Reserve, which had no direct impact on overall GDP. Imports, which are a subtraction from GDP, rose in the third quarter. Economists had expected GDP to rise at a 3.1 percent rate. Real final sales to domestic private purchasers, a measure of underlying demand in the U.S. economy, expanded at a 4.9 percent pace. That is an acceleration from the second quarter’s 4.6 percent growth rate and the fastest pace since the second quarter of 2021. Spending by U.S. consumers grew at a 3.8 percent rate, matching the prior quarter’s spending growth and beating expectations for 3.5 percent. Private nonresidential fixed investment, a key measure of business activity, grew at a 12.7 percent rate, the swiftest pace since the first quarter of 2023. Within that, investment in business structures grew at a 5.4 percent rate. Investment in business equipment grew at a 20.4 percent rate, the fastest pace since the pandemic rebound in the third quarter of 2020. This growth was driven by investment in computers and peripheral equipment, likely reflecting the boom in what President Donald Trump calls “super intelligence.” Investment in intellectual property, which includes software, rose at an 8.4 percent pace. Residential investment declined at a 3.3 percent annualized rate, reflecting weakness in the housing market. The personal consumption expenditures price index, the Commerce Department’s measure of inflation, rose at a seasonally adjusted annual rate of 2.1 percent. Core PCE prices, which exclude food and energy, rose at a 2.5 percent pace. Nominal GDP, which is not adjusted for inflation, expanded at an annualized 5.6 percent rate.