US Q3 GDP annualized growth hits 3.4%, beating forecasts as AI investment and inflation heat up

US real GDP grew at a 3.4% annualized quarterly rate in the third quarter, accelerating from 2.2% in the second quarter and exceeding the 3.2% forecast, according to preliminary Bureau of Economic Analysis data. AI-related capital expenditure and resilient household spending were key growth drivers. Business equipment investment made its largest contribution to GDP growth since 2011 excluding the post-pandemic period, with spending directed toward AI infrastructure, computing equipment and related technology. Personal consumption expenditure grew at a 3.8% annualized rate for a second consecutive quarter. Inflation data released alongside GDP underscored the policy tension. The September PCE price index rose 0.5% month over month, its largest increase in six months, and 3.6% year over year, up from 3.4% in August. Core PCE rose 0.3% month over month and 3.1% year over year. September nominal personal spending rose 0.5%, down from 0.9% in August, while real personal spending was unchanged. The Federal Reserve had held its target range at 3.75% to 4.00% one day earlier, with a 10-2 vote; two dissenting officials favored a 25-basis-point increase. Additional employment, spending and inflation data are due before the Fed’s December meeting.