U.S. GDP jumps to 3.4% as AI spending and high earners fuel growth

The U.S. economy expanded at a 3.4% annual rate in the third quarter, according to the Commerce Department.

Growth accelerated from a 2.2% pace in the spring. The report arrived days before the midterm elections.

Investments in artificial intelligence were a primary driver of the increase. AI companies continued to build data centers and spend heavily on technology development. Consumer spending also pushed GDP higher. Higher-income Americans led this spending as they better withstand high inflation.

The strong growth contrasts with the feelings of many voters. Inflation remains stubbornly high, raising the cost of daily necessities. The conflict with Iran has also driven up energy prices, including gasoline. Wage growth has not kept up with price increases, squeezing many households.

Siri Steven, a manager at a resale store in Decorah, Iowa, said she and her husband are delaying repairs on their 130-year-old home. "We barely go out to eat now," she said. "I really have to be mindful of our budget and make sure that we can pay all our bills and not overdraft." Her family operates on a paycheck-to-paycheck basis without savings.

The personal saving rate fell to 3.8% in September, down from 4.1% in August. Prices rose 3.6% in September compared to a year earlier, outpacing the Federal Reserve's 2% target. The central bank held interest rates steady on Wednesday. The new inflation data adds pressure to raise rates at the next meeting in December.

Mark Zandi, chief economist at Moody's Analytics, described the growth as fragile. He cited the need for businesses and consumers to navigate around tariff policies and the war in Iran. "We're growing," Zandi said. "The economy is moving forward but it's a very, very fragile growth. It doesn't feel like we're kicking it in on all cylinders."