U.S. Economy Grows 3.4% in Third Quarter, Exceeding Market Forecasts

Key Facts

U.S. real gross domestic product grew at an annual rate of 3.4% in the third quarter of 2026, according to the advance estimate released by the Bureau of Economic Analysis on October 29. The reading was above the market forecast of 3.2% and accelerated from 2.2% in the second quarter, according to EL7 data and the bureau’s release. Treasury Secretary Scott Bessent had predicted strong third-quarter data, but said before its release that he had not seen it yet. “I expect it to be strong,” Bessent told CNBC, adding: “I haven’t seen it yet.” The reading was released as the Federal Reserve kept its target interest rate range at 3.75% to 4%, in a decision that reflected divisions within the monetary policy committee over the appropriate next step.

Details of the advance estimate showed that consumption was one of the main drivers of growth, with consumer spending rising at an annual rate of 3.8% in the third quarter. Business investment excluding housing increased 12.7%, while investment in information-processing equipment jumped 37.4%, reflecting strong spending on equipment linked to artificial intelligence. The Bureau of Economic Analysis said investment, consumer spending and government spending contributed to the increase in output. Those contributions were partly offset by a decline in exports, the bureau said. These components point to strong domestic demand and solid investment behind the growth reading, with a countervailing effect from foreign trade.

Not all parts of the economy shared the same momentum: residential investment fell 3.3% in the third quarter, after declining in 6 of the past 7 quarters. The Associated Press attributed continued pressure on this investment to higher mortgage rates. By contrast, real final sales to private domestic purchasers grew at an annual rate of 4.9%, up from 4.6% in the second quarter. The measure tracks domestic private demand and accelerated despite continued weakness in residential investment. The figures show a gap between strength in consumption and business investment on one hand, and housing-related spending on the other.

The acceleration in output was accompanied by a slowdown in the price indicators included in the advance estimate. The personal consumption expenditures price index rose at an annual rate of 2.1% in the third quarter, compared with an increase of 5.0% in the second quarter. The index excluding food and energy eased to 2.5% from 3.3% in the previous period. But the Federal Reserve said in its October 28 statement that inflation remained elevated, economic activity was expanding at a solid pace and domestic spending remained resilient. The statement added that uncertainty remained elevated in part because of geopolitical developments. These indicators put the strong growth reading alongside the central bank’s assessment that inflation had not eased enough to change its stance at that meeting.

The Federal Open Market Committee kept the federal funds rate target range at 3.75% to 4%, approving the decision by 10 votes to 2 at its October 28 meeting. Lisa Cook and Beth Hammack voted to raise the range by a quarter of a percentage point. The vote shows that most members favored holding rates steady, while the two dissenters saw a rate increase as the more appropriate choice at that meeting. The committee’s statement had described activity as expanding at a solid pace, with resilient domestic spending and inflation remaining elevated. In Wednesday’s session following the decision, the MSCI All Country World Index rose 4.29 points, or 0.38%, to 1,134.03 points, according to Reuters via Investing.com.

The Bureau of Economic Analysis will issue two subsequent estimates of third-quarter GDP, allowing the advance reading to be updated as more data become available. The bureau set November 25, 2026, at 8:30 a.m. Eastern time for the second estimate. The third estimate will follow on December 23, 2026, at the same time. This follows the advance estimate showing annualized growth of 3.4%, exceeding the market forecast of 3.2% and accelerating from 2.2% in the second quarter. The later figures will be the next official updates to the estimate of U.S. economic performance from July through September.