The key facts

  • Real US GDP grew 3.4% at an annualized rate in the third quarter, ahead of market expectations.
  • Inflation by the Fed's preferred PCE index accelerated to 3.6% year over year in September; energy prices rose 21.3%.
  • The Fed kept rates unchanged, and markets expect another quarter-point hike in December.

Strong growth amid accelerating inflation

The US Department of Commerce reported, that real GDP grew by 3.4% at an annualized rate in the third quarter, beating market expectations. Growth was driven by investment, consumer spending and government spending, partly offset by a decline in exports; imports, which are subtracted from the GDP formula, also rose faster than in the previous quarter. This is a preliminary estimate by the Bureau of Economic Analysis: two more will follow in the coming weeks, and the figure may be revised, AFP notes.

Inflation and the Fed's response

At the same time, inflation accelerated: the PCE price index — the Fed's preferred gauge, which covers a broader range of household spending than the CPI — rose 3.6% year over year in September, including a 21.3% increase in energy prices and services. The day before, the Fed left rates unchanged, citing the need for additional data. Fed Chair Kevin Warsh called current inflation

Political context and assessments

The data were published a week before the midterm elections, in which Democrats are trying to take control of both chambers of Congress from Republicans, and the economy is a key issue for voters. According to AFP, gasoline prices for American consumers rose by an average of 42% due to a surge in global energy prices amid the US and Israel war with Iran, and the president's tariff policy also fueled inflation. Democratic Senator Elizabeth Warren said that since Trump took office, families have paid on average $3,772 more due to inflation. Economists point to the unevenness of growth: Navy Federal Credit Union chief economist Heather Long called the economy