US GDP Grows 3.4% in Third Quarter, Beating Forecasts on Consumer Spending and AI Investment

The US economy expanded at a 3.4% annualized rate in the third quarter, the Commerce Department's Bureau of Economic Analysis said Thursday in its advance estimate, topping a Reuters forecast of 3.2% and estimates ranging from 1.0% to 4.2%. Resilient consumer spending and AI-driven business investment offset higher oil prices tied to the Middle East conflict. Consumer spending, which accounts for more than two-thirds of the economy, rose at a 3.8% pace in the July-September quarter, matching the second quarter. The growth rate exceeds the roughly 2% pace some Federal Reserve officials consider non-inflationary. The Fed on Wednesday held its benchmark rate in the 3.75%-4.00% range, noting inflation "remains elevated," and economists expect a December hike. Some economists cautioned the strong GDP reading may not reflect the true economy given rising AI spending with uncertain payoffs. Households are saving less and drawing on nest eggs, and with average gasoline prices above $4 a gallon, economists anticipated a slowdown in spending.