The US economy grew at an annual rate of 3.4 percent in the third quarter of 2026, according to the advance estimate released on Thursday, 29 October, by the Bureau of Economic Analysis in Washington. The July-to-September figure, which covers the three months before Tuesday’s midterm elections, was up from 2.2 percent in the second quarter and above the 3.2 percent pace economists polled by Reuters had forecast.
The acceleration was driven by investment, consumer spending and government spending, the bureau said, partly offset by a decrease in exports. Imports, which are subtracted in the calculation of gross domestic product, increased. In current dollars, GDP rose at a 5.6 percent annual rate.
What the headline number does — and does not — mean
The 3.4 percent figure is an annualised rate, not the amount the economy expanded in three months. The bureau puts the actual quarter-to-quarter increase at about 0.8 percent, expressed at an annual rate so it can be compared with other quarters.
That distinction matters because the advance estimate is only the first of three readings. The bureau will publish its second estimate, along with corporate profits, on Wednesday, 25 November 2026, and the figure may be revised as more complete source data arrives.
Consumers kept spending, even as the mood stayed gloomy
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 3.8 percent pace in the July-to-September quarter, matching its second-quarter rate. Within services, health care and food services and accommodation led the increase, while prescription drugs led the rise in goods spending.
The strength sits awkwardly beside households’ own assessment of the economy. The Reuters report on third-quarter growth notes downbeat consumer sentiment and historically low layoffs supporting spending, alongside households saving less and dipping into savings, with average gasoline prices still above $4 a gallon.
Investment and inventories did the heavy lifting
The bureau said the acceleration from the second quarter primarily reflected faster investment and an upturn in government spending, partly offset by a downturn in exports. Private inventory investment, led by wholesale trade and manufacturing, and equipment spending, led by information processing equipment such as computers, were the largest contributors within investment.
Exports fell mainly because of petroleum and related products, while capital goods, excluding automotive products, led the increase in imports. Real final sales to private domestic purchasers, the combined total of consumer spending and private fixed investment, rose 4.9 percent, up from 4.6 percent in the second quarter.
| Measure (seasonally adjusted annual rate) | Q2 2026 | Q3 2026 advance |
|---|---|---|
| Real GDP | 2.2% | 3.4% |
| Current-dollar GDP | — | 5.6% |
| Consumer spending | 3.8% | 3.8% |
| Real final sales to private domestic purchasers | 4.6% | 4.9% |
| PCE price index | 5.0% | 2.1% |
| Core PCE price index (excluding food and energy) | 3.3% | 2.5% |
Quarterly prices cooled, but the yearly inflation picture stayed hot
The price index for personal consumption expenditures, the Fed’s preferred inflation gauge, rose at a 2.1 percent annual rate in the third quarter, down sharply from 5.0 percent in the second quarter. Core PCE prices, excluding food and energy, slowed to 2.5 percent from 3.3 percent.
Measured year on year, however, the picture looked less comfortable, with September PCE prices up 3.6 percent from a year earlier, according to Reuters analysis of the separate September income and outlays report. That tension, between a cooling quarterly pace and still-elevated yearly inflation, is central to the Federal Reserve’s next decision.
What this means for the Fed’s December meeting
Just a day before the GDP release, the Fed held rates steady at 3.75% to 4% in a 10-2 vote, with two officials preferring an immediate increase. The Fed’s next meeting is scheduled for Tuesday, 8 December, and Wednesday, 9 December, its final rate decision of 2026, and market pricing cited by Reuters put roughly 80 percent odds on a quarter-point increase there.
Strong growth above the roughly 2 percent pace some Fed officials regard as non-inflationary gives the hawks a stronger argument, while the cooling quarterly price data gives the majority room to wait. The BEA advance estimate itself makes no forecast, and neither the bureau nor the Fed has said what December’s decision will be.
Why the timing matters for voters
The report landed less than a week before the midterm elections on Tuesday, 3 November 2026, which will decide control of Congress. It is the last major official reading on the economy before voters go to the polls, and both parties are likely to cite it, one for the headline growth, the other for the household squeeze behind it.
For readers, the honest read is narrower than either campaign claim: output accelerated in the summer, consumers kept spending, quarterly price pressures eased, and the yearly inflation rate and the Fed’s December decision are both still unresolved.
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