The United States economy is expected to have picked up speed in the third quarter of 2026, with US GDP Q3 2026 forecast to grow at a 3.2% annualised rate, powered by resilient consumer spending and a boom in artificial-intelligence investment that more than offset the drag from higher oil prices. The Bureau of Economic Analysis publishes its advance estimate of third-quarter gross domestic product at 8:30 a.m. ET on Thursday, October 29, alongside September's personal income and spending report — including the Federal Reserve's preferred inflation gauge, the PCE price index — in a double release that could reshape expectations for interest rates five days before the midterm elections.
Economists surveyed by Reuters projected GDP growth of 3.2% for the July-to-September quarter, up from a 2.2% pace in the April-to-June period, while a separate Wall Street Journal survey put the median forecast slightly lower, at 3.1%. Either outcome would mark a clear acceleration — and, if the Reuters figure holds, growth comfortably above the roughly 2% pace some Fed officials regard as non-inflationary. The catch is the composition: a widening trade deficit, record imports tied to the AI buildout, and households squeezed by petrol prices above $4 a gallon all sit underneath the headline number.
Thursday's double release is the most important economic data of the week, and one of the last major readings before voters decide control of Congress on Tuesday, November 3. The advance GDP estimate is the government's first official scorecard for the third quarter and will be revised twice as more complete data arrive. The personal income and outlays report, published at the same moment, adds September's PCE inflation figures, personal income (expected up 0.3%) and consumer spending (expected up 0.6%), plus the week's initial jobless claims, expected at 200,000 against 194,000 the week before.
The Reuters preview, published on Thursday, frames the quarter as a story of two forces pulling in opposite directions. On one side, households kept spending and businesses kept pouring money into AI infrastructure. On the other, the conflict in the Middle East pushed energy prices higher, and a surge in imports — much of it capital equipment for the AI buildout — widened the goods trade deficit sharply in September, after the Reuters survey was conducted. Economists estimated that the trade shortfall alone subtracted at least 4 percentage points from third-quarter growth, a drag that the AI investment boom only partly blunted.
Business spending on equipment is expected to have recorded a third consecutive quarter of double-digit growth, and AI spending likely also boosted investment in intellectual property products. Inventories are expected to have added to growth as well. Construction of data centres to support AI probably lifted business investment in nonresidential structures after it stabilised in the second quarter, and a rebound in government spending is also anticipated. A measure of domestic demand that strips out inventories, trade and government — final sales to private domestic purchasers — grew at a 4.6% rate in the second quarter, and is expected to have surged again.
The expected acceleration would stand in sharp contrast to how households say they feel about the economy. Consumer sentiment has deteriorated markedly, President Donald Trump's approval ratings are at record lows in recent polling, and petrol prices remain above $4 a gallon on average as the US-Israeli war with Iran drags on. September's consumer price index rose 3.7% from a year earlier, and headline PCE inflation was 3.4% year over year in August — both well above the Fed's 2% target.
Consumer spending, which accounts for more than two-thirds of the economy, is projected to have increased at above a 3.0% pace in the third quarter, after growing at a 3.8% rate in the second quarter. Historically low layoffs and moderate hiring are helping to underpin that spending, though wage gains have at times lagged inflation. Households have also been saving less and dipping into savings to fund purchases — a pattern economists warn cannot continue indefinitely if energy prices stay high.
Housing is the clearest weak spot. Rising mortgage rates because of the Middle East conflict are expected to have pushed residential investment back into contraction last quarter. Higher borrowing costs have overshadowed a moderation in house prices, putting homeownership out of reach for many young adults, while homebuilding is further constrained by land and labour shortages amid an immigration crackdown and by higher materials prices due to tariffs on imports.
The data also arrive one day after the Federal Reserve's October decision. On Wednesday, October 28, the central bank held its benchmark rate in the 3.75%-4.00% range in a 10-2 vote, with governors Lisa Cook and Beth Hammack dissenting in favour of a quarter-point rise, while acknowledging that inflation "remains elevated." Fed Chair Kevin Warsh told reporters that "economic activity is expanding at a strong pace," while noting that "while uncertainty remains, owing in part to geopolitical developments, domestic spending has been resilient." Markets closed higher on the decision — the Dow at 52,475.10, the S&P 500 at 7,743.98 and the Nasdaq at 26,549.85 — and traders now look to Thursday's data to test whether a December rate rise, currently priced as the likeliest next move, is justified. The Fed's next decision is due December 9.
The forecast details matter because they show where the growth is — and is not — coming from. Equipment investment, data-centre construction and intellectual property spending are doing much of the heavy lifting, while residential investment contracts and the trade balance drags. That mix is why economists are split on what the headline means: a 3.2% print driven by AI capital spending and inventory accumulation tells a different story from 3.2% driven by broad-based household demand.
Inflation is the other half of the test. The Wall Street Journal survey expects September headline PCE prices to have risen 0.5% on the month and 3.7% on the year, with core PCE — which excludes food and energy — up 0.3% on the month and 3.1% on the year. A hotter-than-expected core reading would reinforce the case for the December rise the Fed's dissenters already wanted in October. A cooler reading would ease pressure, particularly if the GDP headline also disappoints. The interaction matters more than either number alone: strong growth with cooling inflation is the market's favoured combination, while weak growth with hot inflation is the stagflation outcome nobody wants to see five days before an election.
Investors will also watch real consumer spending inside the GDP report, separating inflation-adjusted demand from nominal spending that rises simply because prices are higher. Treasury yields are the transmission mechanism: the 10-year yield ended Wednesday around 5.05%, and a strong growth-plus-hot inflation combination would be expected to push yields higher, while a soft set of numbers would pull them down and shift rate expectations the other way.
"People are very upset about high energy and food prices, and yet the fundamentals for consumers are still decent," said Gus Faucher, chief economist at PNC Financial. "We still have job growth, wage gains and there's the strong stock market that's supporting spending by high-income households, in particular, so consumers continue to increase their spending at a pretty steady clip."
On the durability of the AI boom, Gregory Daco, chief economist at EY-Parthenon, struck a cautiously optimistic note: "There's likely to be more discretion when it comes to investment in AI, but the underlying momentum remains quite strong. AI-related investment is likely to remain a key pillar of US economic activity, even if there are some risks of pullbacks and some questions as to the return on all of its investment."
Stephen Stanley, chief US economist at Santander US Capital Markets, warned that households may have misjudged how long energy prices stay high: "It appears that households made a judgment when the conflict began earlier this year that the run-up in energy prices would prove mostly temporary. That assessment may prove wrong, so consumers may need, at some point, to tighten their belts."
Dean Baker, senior economist at the Center for Economic and Policy Research, offered the sceptical counterpoint: "The overall picture is that the economy is growing at a decent pace, but the primary factors are an AI-driven investment boom and consumption driven primarily by rising stock wealth. It's unclear how long this can continue, but this is not a very stable picture, nor a very positive one for most working people."
Thursday's numbers matter for three audiences at once. For the Federal Reserve, they are the first hard evidence since the October meeting on whether growth is running too hot, inflation is cooling, or both — the exact inputs for the December 9 decision. A 3.2% GDP print with core PCE still above 3% would strengthen the hand of officials who wanted a rise in October; a softer pair would argue for patience.
For markets, the release lands hours before Amazon reports third-quarter results after the close on Thursday, with its earnings call at 5 p.m. ET, capping a week in which Alphabet's results disappointed and the Fed held steady. A strong GDP figure could support earnings expectations but push bond yields higher, squeezing equity valuations; a weak one could do the reverse. Either way, the reaction will be read through the lens of the December rate decision.
For voters, the timing is political whether anyone intends it or not. The advance GDP estimate and the September inflation report are the final official economic scorecard before the November 3 midterms, in a campaign already dominated by prices, affordability and the cost of living. More than 40 million early ballots have already been cast, but millions more voters will head to the polls with Thursday's headlines fresh. A headline of 3.2% growth will be claimed by the White House as vindication; the 3.7% inflation rate will be quoted back by its critics. Both numbers are real, and both describe the same economy.
The data land at 8:30 a.m. ET on Thursday, October 29 — 6:30 p.m. in Dhaka — with the BEA's full GDP tables and the personal income and outlays release published simultaneously. Markets will react within minutes, first in Treasury yields and stock futures, then in the regular session. Amazon's results after the close will then test whether corporate earnings match the macro picture.
Friday brings the next data point: the third-quarter Employment Cost Index, expected to rise 0.8%, alongside the Chicago PMI. The GDP estimate itself will be revised twice in the coming months as more complete source data arrive, so Thursday's figure is a first draft, not a final verdict — but it is the draft that markets, the Fed and the campaigns will all be quoting on Friday morning.
US News Pulse will update this story with the actual GDP and PCE figures as soon as the BEA publishes them.
At 8:30 a.m. ET on Thursday, October 29, 2026, together with September's personal income and outlays report, which includes PCE inflation. That is 6:30 p.m. in Dhaka.
Economists surveyed by Reuters expected growth of 3.2% at an annualised rate, up from 2.2% in the second quarter. The Wall Street Journal survey median was 3.1%.
The PCE price index measures changes in the prices of goods and services consumed by households and is the Federal Reserve's preferred inflation gauge. Core PCE excludes volatile food and energy prices, making it a cleaner read on underlying inflation trends.
The Wall Street Journal survey expected headline PCE prices up 0.5% on the month and 3.7% on the year, with core PCE up 0.3% on the month and 3.1% on the year. August headline PCE was 3.4% year over year.
Strong growth with hot inflation would strengthen the case for a Federal Reserve rate rise at its December 9 meeting, after the Fed held rates at 3.75%-4.00% on October 28. Cooler inflation, or weaker growth, would argue for holding steady.
Related coverage: Fed Holds Interest Rates at 3.75%-4% in 10-2 Vote Despite 3.7% Inflation | Amazon Q3 Earnings Preview: AWS Growth in Focus as $202 Billion Quarter Looms | Wall Street October 28, 2026: Stocks Edge Higher as Fed Holds Rates
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