US GDP growth picks up on the back of investment in AI
The US economy grew by 3.4 per cent (annualised) in the third quarter despite the wars. Spending by technology firms rose by 12.7 per cent. PCE inflation jumped to 3.6 per cent.
by Luca Veronese from New York
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The US economy grew at its fastest rate in the past year during the third quarter, weathering the rise in oil prices caused by the war in the Middle East: the stronger-than-expected GDP growth – 3.4 per cent on an annualised basis – was driven by robust consumer spending and, to an even greater extent, by massive investment in artificial intelligence by major technology firms.
With the mid-term elections just a few days away, Donald Trump is right to highlight the strength of the US economy. But overall economic growth cannot make up for the difficulties faced by households: the high cost of living is largely caused by the war in Iran and the tariff battle sparked by the Republican administration.
The Personal Consumption Expenditure (PCE) index (the Fed’s preferred indicator) showed that prices in September rose by 3.6 per cent compared with the same month in 2025, with a 0.5 per cent increase – the sharpest rise since March. The core PCE index, which excludes the volatile components of energy and food, rose by 0.3 per cent month-on-month and 3.1 per cent year-on-year.
These figures are in line with expectations, though they show inflation well above the 2 per cent target set by the Federal Reserve. This explains the discontent amongst voters who are having to cope with further price rises, after prices have risen by an average of 30 per cent over the last six years: not only for fuel but also for food, healthcare and housing.
For Trump, inflation remains the toughest challenge to tackle in these mid-term elections, in which the Republicans could lose not only their majority in the House but also control of the Senate.
