U.S. economy grew 3.4% in Q3, beating forecasts

The U.S. economy grew at an annual rate of 3.4 per cent in the third quarter, faster than economists expected, the Bureau of Economic Analysis said Oct. 29, 2026.

The advance estimate for July to September compares with growth of 2.2 per cent in the second quarter. Economists had forecast 3 per cent in a FactSet survey, The Associated Press reported, and 3.2 per cent in a Reuters poll, Reuters reported.

Consumer spending rose at a 3.8 per cent rate, matching the second quarter, according to Reuters. Business investment excluding housing rose 12.7 per cent, the AP reported, with spending on information processing equipment up 37.4 per cent, software up 9.6 per cent and research and development up 7.5 per cent. Reuters reported that equipment spending rose at a 20.9 per cent rate, the fastest since the third quarter of 2020, and added 1.16 percentage points to growth.

The bureau said real final sales to private domestic purchasers, a measure that strips out government spending, trade and inventories, increased 4.9 per cent, up from 4.6 per cent in the second quarter. It said the increase in GDP reflected higher investment, consumer spending and government spending, partly offset by a drop in exports. Imports, which are subtracted in the calculation, increased; Reuters put the rise at 19.7 per cent.

The bureau tied the rise in government spending to federal outlays, led by non-defence consumption expenditures. In its technical notes, it linked that increase to sales from the Strategic Petroleum Reserve. Exports fell mainly because of lower shipments of goods, led by petroleum and related products, the bureau said.

Not every part of the economy grew. Housing investment fell 3.3 per cent, the AP reported, and has declined in six of the past seven quarters. The AP said the economy has held up despite higher energy prices linked to the fighting with Iran.

Inflation figures were mixed. The bureau said its price index for personal consumption expenditures rose at a 2.1 per cent annual rate in the third quarter, down from 5.0 per cent in the second. Excluding food and energy, the index rose 2.5 per cent, down from 3.3 per cent. Reuters reported that the monthly index rose 0.5 per cent in September, after 0.3 per cent in August, and that the 12-month rate reached 3.6 per cent, up from 3.4 per cent in August. It also reported that real disposable income fell 0.3 per cent in September.

“The consequences of an economy at full employment in addition to a historic capital expenditures expansion are on vivid display,” Joseph Brusuelas, chief economist at RSM, told Reuters.

Kyle Moore, chief economist at the Century Foundation, told Reuters that “growth isn’t enough to give American families economic security.” He said most of the growth “has been lopsided, focused on the AI buildout.”

The report landed a day after the U.S. Federal Reserve left its benchmark rate at 3.75 per cent to 4 per cent. Reuters reported that the central bank said inflation “remains elevated” and that the GDP data strengthened the argument for a rate increase in December. Two Fed officials dissented in favour of a hike at the meeting, as we reported Oct. 28.

For Canadians, the numbers show the two central banks moving differently on the same day. The Bank of Canada raised its key rate to 2.5 per cent on Oct. 28, its first increase since 2023, while the Fed held. The U.S. is the largest market for Canadian exporters, so the strength of American demand and the path of U.S. interest rates both bear on Canadian growth and on the Canadian dollar.

The bureau will publish its second estimate of third-quarter GDP, along with corporate profits, on Nov. 25, 2026. Advance estimates are based on incomplete data and are routinely revised.

Via The Associated Press and Reuters. Figures from the Bureau of Economic Analysis release of Oct. 29, 2026.

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