The US economy grew at an annualised rate of 3.4% in the third quarter, accelerating from 2.2% in the second quarter and exceeding market expectations of 3.2%. Strong consumer spending and increased corporate investment in artificial intelligence (AI) supported economic activity, even as inflation remained elevated.
The latest figures, reported by the US Bureau of Economic Analysis (BEA) on Thursday, October 29, show the economy expanding at its fastest pace in a year. However, September inflation data also pointed to continued price pressures, strengthening expectations of another Federal Reserve interest rate increase in December.
AI Investment and Consumer Spending Support Growth
Personal consumption expenditure, which accounts for more than two-thirds of US economic output, increased 3.8% in the third quarter. Businesses also continued to spend heavily on AI infrastructure, including data centres and advanced equipment.
Fed Chair Kevin Warsh said economic activity was expanding at a strong pace. He also highlighted resilient domestic spending and business fixed investment reaching historically high levels as a share of GDP.
The growth figure exceeded the approximately 2% pace that many Federal Reserve officials consider consistent with non-inflationary expansion. The US economy also continued to outperform other G7 economies, according to the supplied reporting.
September PCE Inflation Accelerates
The BEA reported that the personal consumption expenditures (PCE) price index increased 0.5% month-on-month and 3.6% year-on-year in September. Core PCE inflation, which excludes food and energy, rose 0.3% month-on-month and 3.1% year-on-year.
Both measures remained above the Federal Reserve’s 2% inflation target. The inflation figures came a day after the Fed kept its policy rate unchanged at 3.75%–4.00%. The decision received 10 votes in favour of holding rates and two dissenting votes from officials who preferred an increase.
Investors are now expecting a possible rate hike at the Fed’s December meeting, with the supplied reporting also noting expectations of further increases next year.
US Treasury Yields Decline After Inflation Data
US Treasury yields moved lower following the release of the economic data. The 10-year Treasury yield fell 2.74 basis points to 5.02%, while the 2-year yield declined 2.51 basis points to 4.71%. The 30-year Treasury yield slipped 1.08 basis points to 5.352%.
The figures present a mixed economic picture: growth and consumer demand remain strong, while inflation continues to exceed the Fed’s target. The next key policy development identified in the supplied reporting is the Federal Reserve’s December rate decision.
Q1. How much did US GDP grow in Q3 2026?
US real GDP grew at an annualised rate of 3.4% in the third quarter, up from 2.2% in Q2.
Q2. What supported US economic growth in Q3?
Strong consumer spending and corporate investment in AI infrastructure, including data centres and advanced equipment, supported growth.
Q3. What was US PCE inflation in September 2026?
Headline PCE inflation increased 0.5% month-on-month and 3.6% year-on-year. Core PCE inflation rose 0.3% monthly and 3.1% annually.
Q4. What interest rate did the Federal Reserve maintain?
The Federal Reserve held its policy rate at 3.75%–4.00%, with two officials voting in favour of an increase.
Q5. How did US Treasury yields react to the data?
The 10-year Treasury yield fell 2.74 basis points to 5.02%, the 2-year yield declined 2.51 basis points to 4.71%, and the 30-year yield dropped 1.08 basis points to 5.352%.
