The U.S. economy expanded at an annualized rate of 3.4% in the third quarter of 2026, accelerating from 2.2% in the previous quarter and exceeding market expectations of 3.2%, according to the advance estimate released Thursday by the Bureau of Economic Analysis (BEA).
The result marked the strongest quarterly growth in a year, supported by a sharp increase in private investment, resilient consumer spending and higher government expenditures.
The figures indicate continued momentum in the world’s largest economy, even as elevated energy prices, borrowing costs and uncertainty surrounding international trade present challenges.
Business investment, particularly in computing equipment and artificial intelligence infrastructure, was a major contributor to the expansion.
AI Investment Drives Business Spending
Private domestic investment increased at an annualized rate of 19.4% in the third quarter, compared with 4.6% in the previous three months.
Equipment investment rose 20.9%, accelerating from 13.4% in the second quarter, with particularly strong growth in computers and peripheral equipment.
The increase reflects substantial capital spending on advanced computing infrastructure as technology companies and other businesses expand their artificial intelligence capabilities.
Investment in intellectual property products, including software and research and development, increased 8.4%, compared with 9.2% in the previous quarter.
Meanwhile, investment in structures advanced 5.4%, up from 0.1% in the second quarter.
Consumer Spending Remains Resilient
Personal consumption expenditures increased at an annualized rate of 3.8%, matching the growth recorded in the second quarter.
Spending on goods rose 3%, compared with 4.5% previously, while spending on services accelerated to 4.1% from 3.4%.
Health care was a significant contributor, particularly expenditures on hospitals and outpatient services.
Spending on prescription drugs also supported growth in goods consumption.
Consumer spending accounts for more than two-thirds of U.S. economic activity, making household demand a central driver of overall GDP performance.
The latest figures suggest that consumers continued to support economic expansion despite elevated prices and borrowing costs.
Nevertheless, the sustainability of spending will depend on developments in employment, household income and inflation.
Government Spending and Inventories Support Growth
Government spending increased at an annualized rate of 5.3%, reversing a 0.1% decline in the second quarter.
The acceleration was primarily associated with federal nondefense spending and accounting effects related to crude oil transactions involving the Strategic Petroleum Reserve.
According to the BEA, sales of crude oil from the reserve were lower than in the previous quarter, affecting the measurement of government consumption expenditures.
The agency noted that these transactions do not directly change overall GDP because the corresponding effects are reflected elsewhere in the national accounts.
Private inventory investment also contributed to economic growth, adding approximately 1.61 percentage points to the third-quarter expansion.
Inventory accumulation can support GDP in the short term, although its contribution may fluctuate as businesses adjust production and stock levels.
Housing Investment Contracts as Trade Weighs on GDP
Despite the strong overall result, residential investment returned to contraction in the third quarter.
Housing investment declined 3.3%, following a 2.8% increase in the second quarter.
The reversal highlights continued pressure on the residential property market, where elevated mortgage rates and affordability constraints have affected construction and purchasing activity.
International trade also reduced GDP growth.
Exports declined at an annualized rate of 5.7%, reversing a 5% increase in the previous quarter.
Meanwhile, imports rose 19.7%, accelerating from 12.6% in the second quarter.
Because imports are subtracted when calculating GDP, the increase in purchases from abroad weighed on the headline growth figure.
The trade figures indicate that domestic demand remained strong enough to support higher imports even as exports weakened.
