The United States economy expanded at an annualised rate of 3.4% in the third quarter of 2026, accelerating from the 2.2% recorded in the previous quarter and exceeding the median market forecast of 3.2%.
The Bureau of Economic Analysis (BEA) reported the figures on Thursday, with consumer spending increasing by 3.8%. Goldman Sachs economists described the composition of the quarter’s growth as “strong”.
However, the figures show that several areas of the economy contributed unevenly to the expansion, with investment in technology and industrial equipment accounting for significant increases while housing activity weakened.
AI-Related Equipment Spending Drives Business Investment
Investment in information-processing equipment, including computers and peripherals used in artificial intelligence infrastructure, increased by 37.4% during the quarter, according to BEA data analysed by Goldman Sachs.
Spending on industrial equipment also recorded a substantial increase, rising by 24.7%.
The BEA said overall growth was supported by investment, consumer spending and government expenditure, although a decline in exports partly offset those gains.
Within private investment, the agency identified increases in inventories and equipment, particularly information-processing equipment, as major contributors.
Business investment is expected to remain a significant source of growth in the coming quarter. Goldman Sachs forecasts an annualised increase of 8.2% in business investment during the fourth quarter, largely driven by AI-related spending.
Housing Investment Declines as Market Activity Weakens
While technology investment expanded, residential investment moved in the opposite direction, falling by 3.3% in the third quarter.
David Kelly, chief global strategist at J.P. Morgan Asset Management, described the housing market as being in a prolonged downturn in his weekly economic note.
Kelly cited a National Association of Home Builders measure showing that buyer traffic fell to 18 in early October, its lowest level in almost 15 years.
He estimated that housing starts would reach 1.32 million units in 2026, representing the weakest annual figure since 2019.
The homeownership rate has also declined from 66% in 2022 to 65.2%. Kelly noted that the recent fall has been more pronounced among people younger than 35.
Goldman Sachs expects residential investment to contract at an annualised rate of 5% in the fourth quarter.
Kelly said weaker housing activity could help restrain economic growth and inflation while investment in artificial intelligence remains strong. However, he also highlighted the consequences for households, particularly younger Americans whose plans to buy homes and establish families may be delayed.
Inventories Provide a Significant Boost to GDP
Business inventories also played a major role in the third-quarter growth figure.
The accumulation of goods held by companies contributed 1.6 percentage points to the overall GDP increase, accounting for almost half of the reported expansion.
Inventories can support economic growth when businesses build up stocks, although their contribution can reverse when companies later sell down those holdings.
Consumer spending also showed signs of losing momentum towards the end of the quarter. The September personal consumption and expenditures report indicated that real consumer spending remained unchanged during the final month.
Goldman Sachs expects household spending to slow further as the impact of fiscal stimulus introduced earlier in the year fades.
The bank is currently tracking fourth-quarter economic growth at 1.8%, with consumer spending also projected to increase at an annualised rate of 1.8%.
Domestic Demand Remains Strong Despite Trade Weakness
Other measures in the BEA report showed stronger underlying demand than the headline GDP figure suggested.
Real final sales to private domestic purchasers, which excludes inventories, international trade and government spending, increased by 4.9% in the third quarter. That was higher than the overall GDP growth rate and above the 4.6% recorded in the second quarter.
International trade reduced the headline growth figure by 3.3 percentage points as imports increased and exports declined.
Some of the imported goods were related to the expansion of artificial intelligence infrastructure. The BEA relied largely on import data when calculating its estimate for information-processing equipment.
Labour Market Remains Resilient as Inflation Stays Above 3%
The labour market has continued to show signs of strength, according to figures cited by Goldman Sachs.
The four-week average of initial jobless claims fell to 197,000, its lowest level since 1969.
Core personal consumption expenditures inflation stood at 3.12% year over year in September. However, Goldman Sachs estimated that the Dallas Federal Reserve’s trimmed-mean inflation measure, which the bank considers a better indicator of underlying price trends, was 2.27%.
The Federal Reserve left interest rates unchanged this week. Goldman Sachs nevertheless expects the central bank to increase rates by another quarter of a percentage point in December.
Mortgage Rates and Housing Affordability Remain Under Scrutiny
The average rate on a 30-year fixed mortgage reached 7.32% last week.
Kelly said the rate was not particularly high when compared with historical averages. He noted that the 30-year mortgage rate had averaged 7.68% over the past 50 years and 7.60% during the two decades before the global financial crisis.
Residential construction was valued at $1.182 trillion in the second quarter, equivalent to 3.6% of nominal US GDP, according to Kelly.
Despite the historical comparison of mortgage rates, Goldman Sachs expects housing investment to remain weak in the coming quarters.
Goldman Sachs Sees AI Growth Boost Beginning to Ease
Goldman Sachs economists believe the contribution of artificial intelligence investment to economic growth may be approaching its peak.
In a note published on Thursday, the bank’s global economists said the United States was “passing the peak impulse from the AI boom”.
They expect AI investment to account for a smaller share of US GDP in the coming quarters. They also anticipate a reduced boost to consumer spending from increases in asset prices.
The bank’s projections indicate that the economy may receive less support from AI-related investment as the housing sector continues to struggle.
Kelly expects housing starts to decline to 1.24 million units in 2027, with the figure falling further in 2028.
