Strong business investment and resilient consumer spending drove stronger-than-expected economic growth in the third quarter.
The Commerce Department said Thursday that gross domestic product – the value of all goods and services produced throughout the economy – grew at a seasonally and inflation-adjusted annual rate of 3.4% from July to September.
Government spending also increased, causing growth to accelerate to 2.2% in the second quarter. However, much of this increase reflects the accounting impact of lower oil sales from the Strategic Petroleum Reserve, which has no direct impact on overall GDP. Imports increased in the third quarter, while imports are deducted from GDP.
Economists had expected GDP to grow by 3.1%.
Actual final sales to domestic private buyers, a measure of underlying demand in the U.S. economy, grew at a 4.9% rate. This was an acceleration from the 4.6% growth rate in the second quarter and the fastest pace since the second quarter of 2021.
U.S. consumer spending grew 3.8%, in line with the previous quarter’s spending growth and exceeding expectations of 3.5%.
Private nonresidential fixed investment, a key measure of business activity, grew at a 12.7% pace, the fastest pace since the first quarter of 2023. Among them, investment in commercial structures increased by 5.4%. Investment in business equipment grew at a rate of 20.4%, the fastest pace since the pandemic rebounded in the third quarter of 2020. The growth was driven by investment in computers and peripherals and may reflect a boom in what President Donald Trump has called “superintelligence.” Investment in intellectual property, including software, increased 8.4%.
Residential investment fell at an annual rate of 3.3%, reflecting the weakening real estate market.
The personal consumption expenditures price index, the Commerce Department’s measure of inflation, rose at a seasonally adjusted annual rate of 2.1%. Core PCE prices excluding food and energy rose 2.5%.
The annualized GDP growth rate, not adjusted for inflation, was 5.6%.