GDP hits 3.4% as AI and high earners drive growth

The U.S. economy expanded at an annual rate of 3.4% from July through September, according to data released by the Commerce Department on Thursday. This figure marks a substantial acceleration from the 2.2% annual growth recorded in the previous quarter. For households, this growth reflects a divergence in financial stability, with high-income earners sustaining consumption while lower-income families face tighter constraints.

Two primary factors fueled the third quarter's expansion. Investments from artificial intelligence companies accounted for a major portion of the increase, driven by ongoing capital expenditures for data center construction and technology development. Consumer spending also rose, led by individuals with higher incomes who possess greater financial reserves to absorb persistent inflation.

However, the gains have not reached all households equally. Wage growth has lagged behind price increases, squeezing household budgets. Siri Steven, a manager at a resale store in Decorah, Iowa, stated that she and her husband are delaying repairs on their home, which is more than 130 years old. Steven noted that the family is avoiding dining out to ensure they can cover bills without overdrawing their accounts. She described their financial situation as paycheck to paycheck, with little capacity for savings.

The personal saving rate fell to 3.8% in September, down from 4.1% in August, according to the Commerce Department. Meanwhile, the Consumer Price Index showed prices rising 3.6% in September compared to the same month in 2025. This rate exceeds the Federal Reserve's 2% inflation target. The central bank held its benchmark interest rates steady on Wednesday, but the inflation data adds pressure to consider a rate increase at its December meeting.

Mark Zandi, chief economist at Moody's Analytics, characterized the current economic expansion as fragile. He pointed to policy variables such as tariffs and the U.S. military conflict with Iran as factors complicating business and consumer decision-making. Zandi said, 'We are growing. The economy is moving forward but it is a very, very fragile growth. It does not feel like we are kicking it in on all cylinders.'

The release of the GDP data arrives days before the midterm elections. Many Americans report feeling pessimistic about their personal finances despite the national growth figures. Inflation has increased the cost of daily necessities, while the conflict with Iran has contributed to higher energy costs, including gasoline prices.