US Economic Growth Strengthens in Q3

The US economy expanded at an annualized rate of 3.4% in the third quarter of 2026, marking its strongest growth in a year. The result exceeded the 3.2% forecast and accelerated from the 2.2% growth recorded in the second quarter.

The stronger performance reflected increased investment, resilient consumer spending and contributions from government activity and private inventories. The figures indicate that economic activity remained robust during the quarter, despite weakness in housing and international trade.

Private Investment Accelerates Amid AI Spending

Private domestic investment increased 19.4%, compared with 4.6% in the previous quarter, making it the largest upward contributor to growth.

Equipment investment surged 20.9%, accelerating from 13.4% in the second quarter, with computers and peripheral equipment playing a particularly important role. Investment in intellectual property products rose 8.4%, while spending on structures increased 5.4%, rebounding from 0.1%.

Strong investment in artificial intelligence infrastructure appears to have been an important factor behind the acceleration. Spending on computing equipment and related assets has become a significant component of business investment as companies expand their technological capabilities.

Consumer Spending Remains Resilient

Personal consumption expenditure grew 3.8%, matching the previous quarter’s pace. Spending on goods increased 3%, slowing from 4.5%, while services spending accelerated to 4.1% from 3.4%.

Healthcare-related services, including hospitals and outpatient care, as well as prescription drugs, contributed to services spending.

The continued expansion in consumer demand provided another source of support for overall economic growth, helping offset weakness in other sectors.

Government activity also increased 5.3%, compared with a 0.1% contraction in the second quarter. Sales of crude oil from the Strategic Petroleum Reserve were identified as a leading contributor. Private inventories added 1.61 percentage points to GDP growth.

Housing and Net Exports Remain Weak

Residential investment returned to contraction, falling 3.3% after increasing 2.8% in the previous quarter.

International trade also weighed on the economy. Exports declined 5.7%, reversing a 5% increase in the second quarter, while imports rose 19.7%, compared with 12.6% previously.

The combination of falling exports and rising imports reduced the contribution from net trade, offsetting some of the gains from domestic investment and consumption.

What Investors Should Watch Next

Investors will be monitoring whether strong business investment and consumer spending can sustain economic growth in the coming quarters. The contribution from AI-related equipment spending will remain important, particularly as businesses continue expanding computing capacity.

Housing weakness and the deterioration in net trade also warrant attention. Further developments in these areas could influence the composition of growth, while the durability of consumer demand will help determine whether the economy maintains its current momentum.