Latest: the data the Federal Reserve said it was waiting for landed firm on growth and steady on core inflation. Real gross domestic product increased at an annual rate of 3.4 percent in the third quarter of 2026, the Bureau of Economic Analysis reported in its advance estimate, up from 2.2 percent in the second quarter and above the 3.2 percent consensus and the Atlanta Fed GDPNow estimate of 3.3 percent. BEA said the contributors were increases in investment, consumer spending and government spending, partly offset by a decrease in exports. Imports, which are a subtraction in the calculation of GDP, increased, so trade was a drag on the quarter.
September core PCE inflation, the measure the Fed targets, rose 0.3 percent on the month, the same as in August, and 3.1 percent from a year earlier, up from 3.0 percent in August and in line with expectations set before the release. The headline PCE price index rose 0.5 percent on the month, up from 0.3 percent in August, and 3.6 percent on the year, a pickup driven by the parts of the basket the core measure strips out. Neither reading gives the committee the disinflation evidence Chair Kevin Warsh said on Wednesday it needs before judging the stance appropriate to return inflation to 2 percent.
The household detail underneath the quarterly growth figure was softer. Personal income rose 54.5 billion dollars, or 0.2 percent, in September, and disposable personal income rose 52.7 billion dollars, also 0.2 percent. Nominal consumer spending rose 113.1 billion dollars, or 0.5 percent, split between 35.1 billion dollars on goods and 78.1 billion dollars on services, but real PCE was nearly flat, up 2.6 billion dollars, less than 0.1 percent, after a 0.5 percent real rise in August. Real disposable income fell 0.3 percent on the month. Personal saving was 911.1 billion dollars and the saving rate was 3.8 percent.
Read against Wednesday’s decision, the combination supports the dissenters more than the majority. The FOMC held the target range at 3.75 to 4.00 percent by 10 to 2, with Lisa Cook and Beth Hammack dissenting in favour of an immediate hike, and the statement described activity as expanding at a strong pace with inflation still elevated. A 3.4 percent growth quarter confirms the activity language, and a core PCE rate that has stopped falling, at 3.1 percent on the year with the monthly pace unchanged at 0.3 percent, confirms the inflation language. The second estimate of third quarter GDP, with corporate profits, is due on November 25.