US economy grows 3.4% in third quarter, beating forecasts
The United States economy grew faster than expected in the third quarter of 2026, expanding at a 3.4% annual rate according to the Commerce Department's advance estimate released on Thursday 29 October. The reading beat the 3.2% pace forecast by economists polled by Reuters and the Federal Reserve Bank of Atlanta's GDPNow tracker estimate of 3.3%. It was also a clear step up from the 2.2% growth recorded in the second quarter, and the fastest expansion since the third quarter of 2025.
Investment and spending drove the gain
The department said the acceleration primarily reflected stronger investment and an upturn in government spending, alongside resilient consumer spending. Those gains were partly offset by a downturn in exports, while imports rose, widening the goods trade deficit. Gross domestic product measures the total value of goods and services produced by an economy, and the advance estimate is the first of three readings: the department will revise the figure as more complete data becomes available. Federal Reserve Chair Kevin Warsh had described US activity the previous day as expanding at a strong pace.
Inflation data keeps December hike in view
The growth figures arrived on the same morning as September inflation data showing annual PCE inflation at 3.6%, up from 3.4% in August. With price pressures still running hot, most traders are betting on a quarter-percentage-point rate increase in December, according to CME FedWatch, which would take the benchmark range to 4% to 4.25%. That combination of stronger growth and sticky inflation is why markets reacted the way they did on Thursday: shares and bonds repriced for a higher-for-longer policy path, while gold slipped about 1% as rate-rise bets firmed. The next test for the outlook comes with the December policy meeting, when officials will have several more weeks of data to weigh.
