Economy Grows at 3.4% Pace in Third Quarter on Spending and AI Investment. A Strong Quarter Still Leaves Thin Wallets.

The facts come first below. My opinion follows in the section marked as opinion.

The U.S. economy grew at a 3.4 percent annual rate in the third quarter of 2026, covering July, August and September, according to the advance estimate released Thursday by the U.S. Bureau of Economic Analysis. That was up from 2.2 percent growth in the second quarter. The bureau said the increase reflected gains in investment, consumer spending and government spending, partly offset by a decrease in exports.

The same release showed inflation in the quarter cooling on the government's preferred gauge. The personal consumption expenditures price index rose 2.1 percent, compared with 5.0 percent in the second quarter, and excluding food and energy it rose 2.5 percent, compared with 3.3 percent, the bureau reported. Real final sales to private domestic purchasers, the sum of consumer spending and private fixed investment, rose 4.9 percent. Thursday's figure is the first of three estimates; the second is scheduled for Nov. 25.

What drove the growth

Economists had expected 3 percent growth, according to a FactSet survey cited by the Associated Press, as published by PBS News. Consumer spending rose at a 3.8 percent pace. Business investment, excluding housing, was up 12.7 percent, with investment in information processing equipment up 37.4 percent, software up 9.6 percent and research and development up 7.5 percent. Housing investment, hurt by high mortgage rates, fell 3.3 percent and has now dropped in six of the last seven quarters.

NPR reported that a big driver was investment by artificial intelligence companies building data centers, and that consumer spending was led in part by higher-income Americans who are better able to withstand stubbornly high inflation.

The view from the kitchen table

The quarter's numbers do not tell the whole story for many families. A separate Commerce Department report put the personal saving rate for September at 3.8 percent, down from 4.1 percent in August, and showed prices up 3.6 percent from a year earlier, faster than the Federal Reserve's 2 percent target, NPR reported. Wage growth has fallen behind inflation, and the conflict with Iran has driven up energy costs like gasoline.

Siri Steven, who manages a resale store in Decorah, Iowa, told NPR she and her husband are putting off repairs to their more than 130-year-old house. "We barely go out to eat now," she said. "I really have to be mindful of our budget and make sure that we can pay all our bills and not overdraft." Mark Zandi, chief economist at Moody's Analytics, said, "We're growing," adding, "The economy is moving forward but it's a very, very fragile growth," according to NPR.

The report comes just days before the midterm elections, NPR noted, with many Americans saying they feel gloomy about the economy.

Opinion: A strong quarter, a thin wallet

Give credit where it is due. A 3.4 percent growth rate beat forecasts, and it came while energy prices were climbing. American businesses are building and investing for the future. Inflation inside the quarter, by the government's own measure, eased sharply from the spring. That is good news, and anyone who wants to tell you the economy is collapsing is not reading the numbers.

But a nation is not a spreadsheet. Growth led by data center construction and by the spending of households near the top is real growth, yet it does not fill the tank in Decorah. When prices run 3.6 percent higher than a year ago and paychecks have not kept up, families feel squeezed no matter what the quarterly total says. A falling saving rate is not a sign of confidence. Often it is a sign that people are spending what they used to set aside.

The prophet Haggai described this exact frustration in his day: "he that earneth wages earneth wages to put it into a bag with holes." Hard work that never seems to get ahead wears on a household. Leaders in both parties ought to take that seriously instead of reciting the headline number.

The Fed has to decide what to do about prices that remain above its target, as we covered in Fed Holds Rates at 3.75%-4% in 10-2 Vote; Two Wanted a Hike. Washington, for its part, can stop adding to the cost of living with spending it cannot pay for. Families can do what they have always done: keep a budget, save what they can, and not mistake a good quarter for a good year. This is the first estimate, and it will be revised twice. Judge it by what it does for ordinary wages, not by the headline alone.