The United States economy grew by 3.4 percent in the July-September (Q3) 2026 quarter, driven by strong, broad-based growth in investment, ranging from factories to future-oriented technologies, under President Donald Trump’s “Make America Great Again” (MAGA) policy during his second term in the White House. Trump’s “America First” policy has successfully attracted businesses and investment to the world’s largest economy, eventually helping create jobs and advance technology amid occasional unfavourable trade relations with the rest of the world, including Asian giants such as India and China, as well as the European Union, following the imposition of tariffs.
The phenomenal expansion of the world’s largest economy marks its strongest pace of growth in a year and represents an increase of more than 50 percent from the 2.2 percent growth reported in the previous quarter. However, it remains lower than the 4.3 percent growth recorded in the third quarter of last year. A White House statement reads, “Trump’s America First agenda is delivering as promised on the grounds such as faster growth, historic levels of investment, and an economy that continues to outperform the so-called experts.”
James Knightley, Chief International Economist, United States, ING Economics, commented, “The US economy expanded robustly by 3.4 percent in the July-September 2026 quarter, driven by strong consumer performance. Business investment surged, led by tech-related activity, but with many inputs imported, net trade fully offset the capex contribution. Cooler momentum points to slower gross domestic product (GDP) growth in the October-December 2026 quarter, but with inflation remaining hot, the Fed looks set to hike rates in December.”
Higher growth than consensusOver the past three quarters, the US economy has expanded at an annualised rate of 2.7 percent, outperforming the Blue Chip consensus forecast of 2.4 percent and the Congressional Budget Office’s projection of 2.2 percent. The stronger-than-expected performance highlights the resilience of the US economy and suggests that economic activity has remained more robust than economists had anticipated.
The latest performance also challenges earlier expectations of a slowdown in the US economy under President Donald Trump. Growth exceeding forecasts indicates that the economy has demonstrated greater resilience than previously projected, despite persistent uncertainty surrounding the domestic and global economic outlook.
Record investmentPrivate investment in plants and equipment surged at a 9.4 percent rate in the third quarter, accelerating from an already strong second quarter. So far this year, investment is growing more than twice as fast as it did in 2025 and three times faster than the weak 2.3 percent rate in Biden’s final year. That means more factories, more manufacturing, more jobs, and more production here at home. Business investment just posted its strongest quarter in nearly 15 years. With growth of almost 13 percent in the third quarter, it’s a clear signal that companies are betting on American workers, factories, and production under President Trump.
America is investing in its future. Capital goods — the equipment and machinery that build American industry — now make up a record share of U.S. imports. At the same time, consumer goods fell to just 17 percent of goods imports, tied for the lowest level on record. Combined with the surge in domestic investment, this shows President Trump’s policies are helping rebuild American productive capacity. President Trump’s agenda of lower taxes, fewer regulations, energy dominance, and America First trade is fuelling a historic investment boom that is powering strong growth. Businesses are betting on America, and the foundation of the future is being built right here at home.
Resilient consumptionAmerican consumers continued to demonstrate resilience, with consumer spending growing at a solid annualised rate of 3.8 percent in the latest quarter, supported by household demand and continued economic activity. The strong performance suggests that consumer spending remains an important driver of US economic growth, as families have continued to spend despite persistent economic uncertainties and elevated borrowing costs. However, the underlying momentum appears to have weakened as the quarter progressed.
The monthly spending profile indicates that real consumer spending was flat in September, suggesting that households may be becoming more cautious amid affordability pressures and the cumulative impact of higher living costs. While robust consumption during the quarter points to a relatively healthy demand environment, the lack of growth in September raises questions about whether this pace can be sustained in the coming months. A prolonged slowdown in consumer spending could weigh on overall economic activity, particularly if households begin to rein in discretionary purchases.
Gross private investment, meanwhile, recorded particularly strong growth, surging at an annualised rate of 19.4 percent, with equipment investment increasing by 20.9 percent. Much of this strength appears to be concentrated in technology-related spending, reflecting continued investment in computing infrastructure, advanced equipment and artificial intelligence capabilities. Investment in structures rose 5.4 percent, supported in part by expenditure on data centres and associated infrastructure required to accommodate the growing demand for computing power.
Real estate investmentIntellectual property investment also increased by 8.4 percent, reflecting continued spending on software, research and development, and other technology-related assets. Together, these components highlight the growing contribution of technology-led capital expenditure to the US economy. However, the investment recovery remains uneven across sectors. Residential investment declined by 3.3 percent, reflecting persistent affordability challenges in the housing market as elevated mortgage rates continue to increase borrowing costs for prospective homebuyers.
High financing costs have constrained housing demand and discouraged residential construction and investment. The contrast between strong technology-related investment and weakness in housing suggests that the expansion is being supported disproportionately by a relatively narrow set of growth drivers. While sustained technology spending could continue to underpin business investment, weaker housing activity and signs of slowing consumer momentum remain important risks to the broader economic outlook.
Inflation remains hotHowever, many of the high-value inputs required for the technology rollout are being imported from countries such as South Korea and Taiwan. Goods imports surged by 26.4 percent, significantly weighing on headline US economic growth. Consequently, while gross private domestic investment contributed 3.3 percentage points (pp) to GDP growth, net trade fully offset this contribution by subtracting 3.3 pp, leaving no net contribution to overall growth. This trend of technology-related investment being offset by rising imports of technology inputs is likely to persist in the fourth quarter, based on the latest orders data.
The squeeze on household spending power, resulting from weak wage growth and a rising cost of living, caused real household disposable income to decline by 0.3 percent month-on-month (MoM) in September. This is likely to contribute to a slowdown in consumer spending in the fourth quarter. Meanwhile, government spending is also expected to partially reverse the 5.3 percent increase recorded in the third quarter. Against this backdrop, Knightley expects US GDP growth in the October-December quarter to moderate to around 2 percent.
OutlookConsequently, the Federal Reserve is likely to conclude that more needs to be done to bring inflationary pressures under control, leading us to expect a 25-basis-point (bps) rate hike at the December Federal Open Market Committee (FOMC) meeting.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
