The U.S. economy grew at an annual rate of 3.4 percent from July through September, as consumers continued spending despite high prices and businesses rushed to capitalize on the boom in artificial intelligence.
Growth rebounded from the previous quarter’s 2.2 percent annual pace, the Bureau of Economic Analysis said, delivering good news for Republicans hoping to maintain their congressional majorities in the Nov. 3 election.
The economy expanded despite the effects of foreign trade. Imports, which are effectively subtracted from the government’s GDP calculation, jumped as businesses bought more foreign equipment for new AI data centers.
In September, the monthly U.S. trade deficit was nearly $135 billion, up more than 2 percent from the previous month and the highest figure in 18 months, the Census Bureau said Wednesday.
The economy is now growing at a pace that it cannot maintain without aggravating inflation, according to Congressional Budget Office estimates. Economists surveyed by Bloomberg News expect growth to slow in coming months to an annual rate around 2.2 percent.
Still, just five days before voters head to the polls, the economy — with a significant exception — appears to be in good shape. On Wednesday, Federal Reserve Chair Kevin Warsh pronounced the economy “strong,” an upgrade over the central bank’s description last month of “solid” activity.
Inflation, which has exceeded the Fed’s 2 percent target for nearly six years, remains the economy’s principal shortcoming.
Prices in September were 3.6 percent higher than one year ago, according to the central bank’s preferred gauge, the personal consumption expenditures index. Excluding volatile food and energy costs, the index rose by 3.1 percent up from 3 percent in August, according to a separate government report.
Despite inflation that Warsh labeled “elevated,” the Fed left its benchmark interest rate unchanged on Wednesday.
“Economic growth has strengthened,” Warsh told reporters. “Real activity is clearly pointing in the right direction. That’s good news. But inflation is too high.”
Thursday’s GDP estimate will be revised at least twice as government statisticians gather more data.
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