News & analysis
U.S. Growth Accelerates to 3.4% While Key Inflation Gauges Cool Sharply
Investment and government spending drove the third-quarter pickup, with exports falling, while price measures ran far below forecasts and the prior quarter's pace.
Key points
- Real GDP rose at a 3.4% annual rate in the third quarter, beating the 3.2% forecast and accelerating from 2.2%.
- Investment, consumer spending and government spending drove the gain, partly offset by a drop in exports and a larger rise in imports.
- The GDP price index rose 2.3% against a 3.2% forecast, and the PCE price index cooled to 2.1% from 5.0%.
U.S. real gross domestic product grew at a 3.4% annual rate in the third quarter of 2026, the Bureau of Economic Analysis said in its advance estimate, up from 2.2% in the second quarter and above the 3.2% forecast. The price side of the same release decelerated much more sharply than expected.
The composition of the quarter mattered as much as the headline. BEA attributed the increase to investment, consumer spending and government spending, partly offset by a decrease in exports, while imports — which are subtracted in the GDP calculation — increased. The acceleration from the second quarter mainly reflected faster investment and an upturn in government spending, partly offset by the export downturn. Real final sales to private domestic purchasers, which strips out inventories, trade and government and combines consumer spending with private fixed investment, rose 4.9% after 4.6%.
Inflation in the release came in well below expectations. The GDP price index rose 2.3% against a 3.2% forecast, with a separate tally of the same release showing 2.2%. The broader price index for gross domestic purchases rose 3.0%, down from 5.6% in the second quarter. The personal consumption expenditures price index rose 2.1% versus 5.0% previously, and the core PCE measure, which excludes food and energy, rose 2.5% versus 3.3%.
These are advance figures — the first of three passes at the quarter, assembled from incomplete source data such as partial monthly surveys and BEA assumptions, and revised as fuller information arrives. BEA said the next release, the second estimate along with third-quarter corporate profits, is scheduled for Nov. 25, and that the current figures will be superseded then. That makes the size of the growth beat and the depth of the price slowdown provisional numbers rather than settled ones.
The gap between the growth and price readings is the central tension in the report. Demand expanded faster than the quarter's inflation gauges, and because the trade balance subtracted from growth, the domestic components carried more of the 3.4% headline than the top-line figure alone implies — a point reinforced by private domestic final sales running at 4.9%. Whether that combination survives revision, or whether the price deceleration proves as durable as the demand strength, is what the second estimate will begin to settle.
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