US economy grows 3.4% as inflation rises

The US economy grew at an annual rate of 3.4 percent in the third quarter, while the Federal Reserve's preferred inflation measure accelerated in September, the Commerce Department said Thursday.

The Bureau of Economic Analysis said real GDP growth was driven by increases in investment, consumer spending and government spending. Those gains were partly offset by a decrease in exports. Imports, which subtract from GDP calculations, increased more than in the previous quarter.

The GDP figure is an advance estimate and could be revised in later releases.

The Personal Consumption Expenditures price index rose 3.6 percent year-on-year in September, up from the previous month. The PCE category for energy goods and services rose 21.3 percent year-on-year.

The figures came days before US midterm elections in which President Donald Trump's handling of the economy is a central issue. Democrats are trying to win control of both houses of Congress from Republicans.

The Federal Reserve kept interest rates steady on Wednesday. Chair Kevin Warsh said inflation remained “too high” but cautioned against moving too quickly, saying the Fed had seen some tightening of financial conditions after its September rate increase.

Democratic Senator Elizabeth Warren said families were paying more for gasoline, housing and health care. Trump told supporters in South Carolina that the economy was “roaring” and said Democrats would “burn it all down” if they won the midterms.

Heather Long, chief economist at Navy Federal Credit Union, said growth was largely due to an AI business investment surge, while Gregory Daco, chief economist at EY-Parthenon, said consumers were still spending but were stretching their budgets to afford higher-priced goods and services.