U.S. Real GDP Grew at 3.4% Rate in Third Quarter on Tech Investment and Spending
By TopHolding Editorial · Wednesday, October 28, 2026 at 8:00 PM
First Trust reports that U.S. real GDP grew at a 3.4% annual rate in Q3 2026, driven by solid consumer spending and a surge in technology investment that fueled strong core growth.
According to Nate Gerze, Economist, Brian S. Wesbury, Chief Economist, and Robert Stein, Deputy Chief Economist at First Trust Portfolios, the underlying details of the latest economic report were even stronger than the headline figure. Real GDP expanded at an annualized rate of 3.4% in the third quarter of 2026, slightly topping the consensus forecast of 3.2%. Personal consumption expenditures climbed at a 3.8% rate, while business fixed investment surged 12.7%, heavily supported by equipment spending, which grew 20.9%, and intellectual property investment, which rose 8.4%.
First Trust highlights that the ongoing build-out of artificial intelligence infrastructure and data centers served as a crucial catalyst for economic activity. Data center construction advanced at a 127% rate, while investment in information processing equipment, software, and research and development grew at rates of 37.3%, 9.6%, and 7.6%, respectively. The team notes this domestic tech expansion spurred substantial imports of equipment, causing net exports to subtract 3.3 percentage points from output. Aside from tariff-related distortions in early 2025, First Trust points out this was the largest export drag since 1947. Inventories and government spending contributed a combined 2.5 percentage points, though the analysts view this lift as temporary.
The economists consider core real GDP—which tracks consumer spending, business fixed investment, and home building while stripping out trade, inventories, and government outlays—to be the report's primary bright spot. This core metric advanced at a 4.9% rate, marking its fastest pace in over five years. Although First Trust suggests that the AI investment trend will keep core growth elevated, the analysts question whether overall GDP expansion will maintain this momentum, cautioning that above-trend consumption means the underlying trajectory is uncertain.
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Inflation cooled during the quarter, with the GDP price index slowing to an annualized 2.3% rate from 6.1% in the prior period. Nominal GDP climbed at a 5.6% pace. Given that nominal output has averaged 5.7% annualized growth over the past two years, the analysts argue that the Federal Reserve has room to raise its benchmark rate from the current 3.875% target.
Key terms
1. Real Gross Domestic Product (GDP): The inflation-adjusted monetary value of all finished goods and services produced within a country over a specific time period.
2. Nominal GDP: A measure of total economic output that reflects current market prices without adjusting for the effects of inflation.
3. Net exports: The total value of a nation's exports minus the total value of its imports, representing the international trade sector's direct net contribution to gross domestic product.
Source: Nate Gerze, CFA – Economist, Brian S. Wesbury – Chief Economist and Robert Stein, CFA – Dep. Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.
