U.S. economic growth was robust over the summer, as businesses poured money into artificial intelligence and consumers kept spending despite high prices that have soured their mood before midterm elections next week.

Gross domestic product, the broadest measure of goods and services produced in the country, increased at a 3.4% annual rate in the third quarter, adjusted for inflation, the Bureau of Economic Analysis said Thursday.

That was an acceleration from the 2.2% rate in the spring, and was the fastest growth in a year. Consumer spending, which accounts for more than two-thirds of economic output, grew at a 3.8% rate.

The strong spending and growth figures contrast with the poor marks that many voters are giving the economy as they head to the ballot box for next week’s midterm elections. Polls consistently show that Americans are frustrated with the high cost of living and hold President Donald Trump and congressional Republicans responsible for failing to deliver on their promises to improve affordability.

Those frustrations are grounded in reality. Consumer prices were up 3.5% in the third quarter from a year earlier, driven in part by high gas prices that are the direct result of Trump’s decision to go to war with Iran. Americans are increasingly dipping into their savings to keep up with rising costs. Households, in the aggregate, saved just 4.1% of their after-tax income in the third quarter, the lowest rate in nearly four years. After-tax income, adjusted for inflation, rose in the third quarter as a whole but fell in September.

“The data on the economy are something to celebrate, but they look better on paper than they feel to most Americans,” said Diane Swonk, chief economist for KPMG, an accounting firm. And while the strength in the economy is real, she said, it is unequally distributed: Wealthy households are benefiting from growing stock portfolios, while wages, adjusted for inflation, have fallen over the past year.

“When you have a very large middle class and all boats are lifting with the tide, more people feel good about the economy,” Swonk said. “This has more of the feeling of some people in yachts and some people with no boats at all.”

Still, the data released Thursday, which is preliminary, is the latest evidence that while Americans may be unhappy about inflation, they haven’t pulled back their spending. That has helped keep the economy on track through a tumultuous period, but it could also be contributing to inflation by making it easier for businesses to pass on price increases to customers.

“This is a hot economy,” said Aditya Bhave, head of U.S. economics for Bank of America. “That’s the good news. The bad news is that inflation is the price we pay for that hot economy, and inflation is going to remain elevated.”

That could be a problem for officials at the Federal Reserve, who are trying to bring down inflation after five years above their goal of 2% annual price increases. On Wednesday, policymakers decided against raising interest rates for a second straight meeting, a gradual approach that some economists warn runs the risk of allowing inflation to become more entrenched.

Appearing on Fox Business, Kevin Hassett, the director of the White House National Economic Council, said the “really huge” growth figures last quarter reflected a strong economy under Trump.

“You can pick and choose specific prices and say, ‘Oh, I’m very frustrated about that,’ and it’s a legitimate concern, a legitimate feeling, but as an economist, you’ve got to look at things in the aggregate,” he said.

The AI investment boom is responsible, directly and indirectly, for much of the economy’s resilience. Companies have invested hundreds of billions of dollars into building data centers and related infrastructure this year, with trillions more planned by 2030. That has rippled through the economy, lifting the fortunes not just of chipmakers and computer equipment manufacturers but also of companies seemingly far removed from the tech sector, like the producer of the gray paint used inside many data centers.

Investment in equipment grew at an astonishing 20.9% annual rate in the third quarter, and overall business investment grew at a 12.7% annual rate, accounting for more than half of GDP growth. Those numbers are somewhat misleading, because many of the computer chips and other parts used in data centers are produced overseas, and therefore aren’t considered part of domestic output. Imports grew at a nearly 20% rate in the third quarter, in large part because of shipments of computer equipment.

Companies’ AI investments require domestic parts and labor too, however. That is helping to offset weakness elsewhere in the economy, particularly the housing market, which has been hit hard by high interest rates. Residential investment, which includes housing construction, contracted for the sixth time in the past seven quarters.

“Interest rates have been high, input prices have been ramping higher, the midterms have been approaching, other sources of uncertainty are intensifying, and yet we are in the midst of this data center construction boom,” said Anirban Basu, chief economist at Associated Builders and Contractors, a trade group. If not for AI, he said, “we’d be talking about a very different economy, a very different stock market and a very different construction industry.”

Not all companies are benefiting. Smaller construction companies have struggled to win giant data center contracts, and are being squeezed as AI projects drive up the cost of materials and labor.

Investor enthusiasm for all things AI has also helped push up share prices, which, in turn, has supported consumer spending, especially among wealthy households. Economists disagree about exactly how big a role this “wealth effect” is playing in the strong spending figures, but few doubt that it is important.

“The resiliency story has been about the connection between AI-related spending, asset markets and the upper-end consumer,” said Michael Gapen, chief U.S. economist for Morgan Stanley.

The economy’s reliance on AI as a source of growth could turn into a vulnerability if the boom falters. Concerns have mounted in recent weeks as investors have begun to scrutinize some of the companies behind the AI build-out, and to raise questions about whether the massive spending will pay off. Community opposition has also led to the delay or cancellation of data center projects around the country.

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This article originally appeared in The New York Times.

By Ben Casselman/Zack Wittman
c. 2026 The New York Times Company