The U.S. economy grew at a faster pace in the third quarter of 2026, supported by stronger consumer spending, robust business investment, and increased government spending. However, residential investment remained a weak spot, highlighting the continued challenges facing the housing sector amid elevated borrowing costs.
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 3.4% in the third quarter, up from a 2.2% increase in the second quarter of 2026. The acceleration suggests that overall economic activity strengthened during the summer, although the advance estimate remains subject to revision.
The latest GDP report also showed that inflationary pressures eased in the third quarter. The price index for gross domestic purchases rose 3.0% in the third quarter, down from 5.6% in the second quarter. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, increased 2.1%, compared with a 5.0% increase in the previous quarter. Excluding food and energy, the core PCE price index increased 2.5%, easing from 3.3% in the second quarter.
Breaking down the third-quarter data further, growth in real GDP primarily reflected gains in consumer spending, investment, and government spending, which were partly offset by a decrease in exports. Imports, which are a subtraction in the calculation of GDP, increased during the quarter.
Consumer spending, the backbone of the U.S. economy, increased at an annual rate of 3.8% in the third quarter, following a similar pace of growth in the second quarter. The increase in consumer spending reflected increases in both services and goods.
Gross private domestic investment continued to support economic growth in the third quarter, particularly through strong business investment in equipment and intellectual property products. Investment associated with artificial intelligence and information-processing equipment contributed to the expansion, while residential investment remained weak.
Nonresidential fixed investment increased 12.7% in the third quarter. Strong gains in equipment (+20.9%) and intellectual property products (+8.8%) supported business investment. Meanwhile, residential fixed investment (RFI) declined 3.3%. Within the residential category, investment in single-family permanent site structures decreased 5.0% at an annual rate, multifamily permanent site structures rose 0.3%, and spending on improvements rose 2.7%.
Government spending increased 5.3% in the third quarter, contributing to the acceleration in overall economic growth.
Trade activity was a drag on GDP growth in the third quarter. Exports declined, while imports increased. Because imports are subtracted from GDP, the increase in imports further weighed on headline growth, partly offsetting the positive contributions from consumer spending, investment, and government spending.
For the common BEA terms and definitions, please access bea.gov/Help/Glossary.