Commerce Data Confirms 3.4% Economic Growth Before Midterm Vote

The U.S. economy expanded at a 3.4% annual rate from July to September, according to the Commerce Department.

The government released the report on Thursday, just days before the midterm elections. This pace marks a sharp increase from the 2.2% annual growth recorded in the second quarter. The data shows economic activity accelerated in the summer months after a slower spring.

Two primary forces drove the third quarter results. AI companies invested heavily in new data centers and technology development. Consumer spending also rose, fueled largely by higher-income households that can absorb ongoing price increases. These two sectors contributed to the strong headline number despite persistent inflationary pressures.

Household finances tell a different story for many Americans. Inflation reached 3.6% in September, exceeding the Federal Reserve's 2% target. Wage growth has lagged behind rising prices, squeezing middle and lower-income earners. The personal saving rate dropped to 3.8% in September, down from 4.1% the previous month. Many families are spending every dollar they earn.

Siri Steven, a manager at a resale store in Decorah, Iowa, said her family is postponing 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." She described her household as living paycheck to paycheck without building a savings cushion.

The Federal Reserve held interest rates steady on Wednesday. The agency will meet again in December. Mark Zandi, chief economist at Moody's Analytics, characterized the current growth as fragile. He noted that businesses and consumers are adjusting to tariffs and the conflict with 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."

The next major economic indicator is the jobs report, scheduled for release later this month. The December Federal Reserve meeting will determine whether rates rise or hold steady after the summer inflation data.