The U.S. economy expanded at a faster-than-expected pace during the third quarter, driven by strong business investment, resilient consumer spending, and increased government outlays. Gross domestic product (GDP)—representing the total value of all goods and services produced nationwide—rose at a seasonally and inflation-adjusted annual rate of 3.4 percent from July through September, according to data released Thursday by the Commerce Department.
The latest figure marks an acceleration from the second quarter’s 2.2 percent growth rate and exceeded the 3.1 percent expansion forecasted by economists. However, officials noted that a portion of the overall increase stemmed from an accounting effect resulting from reduced sales of oil from the Strategic Petroleum Reserve, an adjustment that had no direct impact on the broader economy. Imports, which function as a subtraction in GDP calculations, also increased during the quarter.
Underlying demand within the domestic economy showed notable strength. Real final sales to domestic private purchasers expanded at a 4.9 percent annualized pace, quickening from the 4.6 percent rate recorded in the previous quarter and marking the fastest pace since the second quarter of 2021.
Consumer spending grew at a 3.8 percent rate, matching the pace set in the prior quarter and outperforming consensus expectations of 3.5 percent growth. Meanwhile, private nonresidential fixed investment—a primary gauge of business activity—surged at a 12.7 percent rate, representing its swiftest pace since the first quarter of 2023.
Breakdowns of business investment revealed sharp gains across multiple sectors. Investment in business equipment jumped at a 20.4 percent rate, the fastest increase since the pandemic-era rebound in the third quarter of 2020. This spike was heavily propelled by spending on computers and peripheral equipment, reflecting expanding investments in advanced computing technologies. Intellectual property investment, including software, rose at an 8.4 percent pace, while spending on business structures grew by 5.4 percent.
In contrast to the broader economic expansion, the housing sector showed continued softness. Residential investment declined at a 3.3 percent annualized rate, pointing to ongoing weakness in the real estate market.
On the inflation front, price pressures showed moderate movement. The personal consumption expenditures (PCE) price index, the Commerce Department’s preferred inflation gauge, increased at a seasonally adjusted annual rate of 2.1 percent. Core PCE prices, which strip out volatile food and energy items, rose at a 2.5 percent pace. Measured without adjustment for inflation, nominal GDP expanded at an annualized rate of 5.6 percent.
