The pace of expansion for the American economy quickened in the third quarter as business investment in artificial intelligence and consumer spending offset higher oil prices and the impact of conflict in the Middle East. According to the advance report, real gross domestic product grew at a 3.4% annualized rate, outperforming the 3.2% consensus forecast and rising from the 2.2% pace recorded in the second quarter. Household spending climbed 3.8%, while nominal GDP growth reached 5.6% when unadjusted for inflation.
The surge in corporate spending on equipment and software added 1.16 percentage points to real GDP, the highest contribution from those sectors since 2011, excluding the pandemic. This AI-driven investment contributed more to the third-quarter expansion than personal consumption. In separate data released the same morning, the September headline personal consumption expenditures price index rose to 3.6% year-over-year and core PCE rose to 3.1%, both figures matching expectations following a Federal Reserve decision to hold interest rates steady.