US GDP grew at a 3.4 percent annual rate in the third quarter of 2026 while September inflation climbed to 3.6 percent, according to Commerce Department data released on October 29 that gave the Federal Reserve a mixed picture days before the midterm elections. The Bureau of Economic Analysis published both the advance GDP estimate and the September personal income and outlays report on the same morning.
Growth accelerated from 2.2 percent in the second quarter and beat the 3.1 percent consensus forecast, according to Zacks and Invezz coverage of the release. Real final sales to private domestic purchasers, a measure of underlying demand, rose 4.9 percent in the quarter.
Inflation heats up again
The personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose 0.5 percent in September from August, lifting the annual rate to 3.6 percent from 3.4 percent. Core PCE, which excludes food and energy, rose 0.3 percent on the month and 3.1 percent on the year, up from 3.0 percent.
Energy did much of the damage, with September gasoline prices jumping 9.1 percent in the consumer price report, according to analysts. But the rise in core inflation troubled policymakers because it suggests price pressures extend beyond volatile categories.
A difficult call for the Fed
The Fed had held its benchmark rate at 3.75 percent to 4.00 percent on October 28, with two officials dissenting in favour of an increase, according to the reporting. The new data pushed market pricing for a December rate rise to around 83 to 84 percent.
Personal income rose 0.2 percent and consumer spending rose 0.5 percent in September, both slightly below expectations. The second estimate of third-quarter GDP, with corporate profits, is scheduled for November 25, alongside the October PCE report.
The next data releases will test whether this combination of strong growth and sticky inflation persists. If spending holds and price pressures ease, the Fed’s path becomes easier; if inflation stays elevated, policymakers will face a harder choice between supporting growth and restoring price stability.
Households will feel the distinction most clearly in grocery and petrol prices, where monthly movements can outweigh the quarterly averages that dominate headlines.
