U.S. economy grew at a 3.4% annual rate in the third quarter, first BEA estimate shows

The U.S. economy grew faster in the third quarter. Real gross domestic product rose at an annual rate of 3.4% in July, August and September, up from 2.2% in the second quarter, according to the advance estimate the Bureau of Economic Analysis released on October 29. Measured over the quarter itself rather than at an annual rate, output grew 0.8%.

Investment, consumer spending and government spending all rose, BEA said, while exports fell. Imports, which are subtracted when GDP is calculated, increased more than in the second quarter. Real final sales to private domestic purchasers, the sum of consumer spending and private fixed investment, rose 4.9%, after 4.6% in the second quarter.

What drove growth

The rise in investment came mainly from business inventories, led by wholesale trade and manufacturing, and from equipment, led by information processing equipment, mainly computers. Consumers spent more on both services and goods. Health care, mainly hospitals and outpatient services, and food services and accommodations led the increase in services, and other nondurable goods, mainly prescription drugs, led the increase in goods.

Government spending rose because of federal nondefense spending, which BEA traced mainly to the Strategic Petroleum Reserve: the government sold less crude oil from the reserve than in the second quarter, and such sales are deducted from government spending in the accounts. BEA notes that the oil sold shows up elsewhere in GDP, so the sales have no direct effect on the total. Exports fell, led by petroleum and related products.

What it means for household budgets

The quarterly price figures measure something different from the monthly ones: they compare the average of July-September with the average of April-June, at an annual rate. BEA's September income and spending report, released the same morning, shows the latest month. The PCE price index rose 0.5% in September alone and was 3.6% higher than a year earlier, up from the 3.4% BEA first reported for August. Excluding food and energy, it was up 3.1% on the year.

Incomes did not keep up in September. Personal income rose 0.2%, or $54.5 billion, mainly from higher pay, led by private wages and salaries, and from government social benefits, led by Medicare. After-tax income also rose 0.2%, but adjusted for prices it fell 0.3%. Spending rose 0.5%, or $113.1 billion, but adjusted for prices it rose less than 0.1%. The personal saving rate, the share of after-tax income that households did not spend, slipped to 3.8% from the 4.1% first reported for August.

The Consumer Price Index told a similar story: prices were 3.7% higher in September than a year earlier, up from 3.4% in August, the Bureau of Labor Statistics reported on October 14. On October 28 the Federal Reserve left its benchmark rate at 3.75% to 4% and said inflation "remains elevated." Our reports on September consumer prices and the Fed's decision have the details.

What comes next

Advance estimates are replaced by later estimates. BEA first put second-quarter growth at 1.5%; its third estimate, published September 30, raised it to 2.2%. The second estimate for the third quarter, together with corporate profits and October personal income and spending, is scheduled for November 25, 2026, at 8:30 a.m. Eastern time.