US economy grows faster than expected in summer

The U.S. economy expanded at an annual rate of 3.4 percent from July through September, the Commerce Department reported on Thursday. This marks a sharp increase from the 2.2 percent growth recorded in the spring quarter. The acceleration came just days before midterm elections, a timing that adds political weight to the figures.

Two main factors fueled the rise. Investment in artificial intelligence infrastructure, including new data centers, contributed heavily to the output. Consumer spending also rose, though the gains were concentrated among higher-income Americans who are better positioned to handle high prices.

The data contrasts with the feelings of many households. Inflation remains sticky, with prices rising 3.6 percent in September compared to the previous year. This exceeds the Federal Reserve's 2 percent target. The Federal Reserve held interest rates steady on Wednesday, though the high inflation reading adds pressure to raise rates at its next meeting in December.

Siri Steven, a manager at a resale store in Decorah, Iowa, described the tight financial situation facing many workers. She and her husband are delaying repairs on their 130-year-old home. Steven said, "We barely go out to eat now," and noted that the family operates paycheck to paycheck without building savings.

The personal saving rate fell to 3.8 percent in September, down from 4.1 percent in August. Wage growth has not kept pace with inflation, squeezing budgets for lower-income households. This disparity means the strong GDP numbers do not reflect the experience of every American.

Mark Zandi, chief economist at Moody's Analytics, characterized the growth as fragile despite the strong headline number. He pointed to business and consumer uncertainty caused by administration policies, including tariffs and the war with Iran. Zandi stated, "The economy is moving forward but it's a very, very fragile growth. It doesn't feel like we're kicking it in on all cylinders."

Energy costs, particularly gasoline, have risen due to the conflict with Iran. These higher costs affect daily expenses for consumers nationwide. The combination of solid growth and persistent inflation presents a complex economic picture as the country moves into the final month of the year.