The U.S. Department of the Treasury published an economic assessment highlighting faster growth driven by business investment and household consumption, alongside risks from energy inflation and higher borrowing costs. According to the advance estimate, real gross domestic product (GDP) grew at an annualized rate of 3.4% in the third quarter of 2026, up from 2.2% in the second quarter. Business fixed investment expanded by 12.7%, led by equipment spending, while consumption increased by 3.8%. A widening trade deficit offset part of these gains, with net exports subtracting 3.3 percentage points from growth. Employment growth slowed even as unemployment declined. Monthly payroll gains averaged 51,000 in the third quarter, down from 81,000 in the previous quarter, while the unemployment rate averaged 4.1%, compared with 4.3%. Annual Consumer Price Index (CPI) inflation rose to 3.7% in September from 3.0% a year earlier, partly reflecting energy prices. Core CPI inflation, which excludes food and energy, slowed to 2.6% from 3.0% over the same period. Annual personal consumption expenditures price inflation stood at 3.6%, above the Federal Reserve’s 2% target. The assessment linked the investment expansion to existing tax provisions allowing full expensing of equipment and research and development. Investment related to super intelligence accounted for nearly 30% of GDP growth during the first three quarters of 2026, although the timing and scale of future productivity gains remain uncertain. Geopolitical uncertainty and energy price volatility could transmit inflation pressures to other goods and services. Higher borrowing costs could worsen the federal debt trajectory, while subdued hiring could limit the labor market’s ability to absorb an increase in layoffs.

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