The latest economic data from Q3 2026 shows the U.S. economy is growing at a strong pace that is exceeding expectations.
Here are some relevant facts:
• Real GDP grew at a 3.4% annual rate in the third quarter, above consensus estimates of 3.2%. Importantly, domestic demand across consumers and businesses was strong. This is measured by "real final sales to private domestic purchasers," which grew 4.9% over the quarter.
• Business investment jumped to 3.3%, one of the strongest levels in recent years. At the same time, net exports detracted from GDP growth with exports surpassing imports. Overall, these are consistent with many trends driving the economy, including the buildout of AI infrastructure. This requires heavy business investment and the import of semiconductors manufactured abroad.
• Consumer spending grew at a very healthy pace of 2.5%. This spending has helped to support GDP growth over the past several years, even though consumers feel pessimistic about the economy and inflation. This disconnect has only grown this year as concerns over the labor market have increased due to weak job gains. Still, ongoing spending has helped to support both the economy and corporate profits.
• What's encouraging in the GDP report is that inflation also cooled sharply by one measure, the PCE price index. It rose just 2.1% in Q3, down from 5.0% in Q2. This is in contrast to other inflation reports, such as the Consumer Price Index, which has been impacted by higher energy prices.
Strong economic data like this is encouraging, but the most important thing for long-term investors is to stay focused on broader trends in growth, earnings, and innovation rather than reacting to short-term swings in any single sector or market event.
