Commerce Department figures reveal the domestic economy grew at a 3.4% annualized pace between July and September, up from 2.2% in the second quarter. Despite this apparent vigor, everyday Americans are feeling squeezed as inflation stands at 3.6% and outpaces wage growth, leading to a decline in personal savings to 3.8%. Analysts warning of underlying fragility note that ongoing geopolitical conflicts and Trump Administration tariffs continue to pose serious risks to long-term stability.
Key points
Artificial intelligence investments and spending by affluent consumers are masking financ…: Artificial intelligence investments and spending by affluent consumers are masking financial strain experienced by lower-income households.
Elevated gasoline prices driven by the war with Iran continue to keep everyday living exp…: Elevated gasoline prices driven by the war with Iran continue to keep everyday living expenses stubbornly high for voters.
Economists consider the broader expansion fragile due to persistent inflation, fiscal unc…: Economists consider the broader expansion fragile due to persistent inflation, fiscal uncertainties, and the impact of administration tariffs.
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The U.S. economy grew faster in the summer compared to the spring, driven by consumer spending as well as investments in AI.
Gross domestic product, which broadly measures economic activity, grew at an annual rate of 3.4% July through September, according to a report from the Commerce Department released Thursday. The previous quarter GDP grew at a 2.2% annual pace.
A big driver for GDP growth in the third quarter was the strong investments from AI companies, which continue to build out data centers and spend big money in developing the technology.
Meanwhile, consumer spending was another of the big drivers of GDP growth, led in part by higher-income Americans who are better able to withstand stubbornly high inflation.
The sturdy GDP data comes just days before the midterm elections, with many Americans saying they feel gloomy about the economy as inflation jacks up the costs of many day-to-day necessities, while the ongoing conflict with Iran drives up energy costs like gasoline.
Although consumer spending has been growing steadily, it has not spread out evenly across households, with lower-income Americans…
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