AI Investment and Consumer Spending Expected to Lift US GDP Growth

US economic growth was forecast to accelerate in the third quarter of 2026, with resilient household spending and continued investment in artificial intelligence infrastructure expected to offset a substantial drag from the country’s widening trade deficit.

Gross domestic product (GDP) was projected to increase at an annualised rate of 3.2% in the July-September quarter, according to a Reuters survey of economists cited on 29 October. The economy expanded at a 2.2% annualised rate in the second quarter.

The forecast preceded the US Bureau of Economic Analysis’ advance GDP estimate, scheduled for release on 29 October. The 3.2% figure is therefore an economist forecast rather than a confirmed growth result.

The expected expansion highlights two important sources of US economic activity: consumer demand, which accounts for more than two-thirds of GDP, and business investment associated with the development of AI systems, computing equipment and data centre infrastructure.

AI investment supports US economic growth

Business investment linked to artificial intelligence was expected to remain a significant contributor to economic activity during the third quarter.

Economists anticipated that spending on equipment would record a third consecutive quarter of double-digit growth. Investment in intellectual property products, which can include software and research and development, was also expected to benefit from AI-related expenditure.

The expansion of data centre infrastructure could have supported investment in non-residential structures after that category stabilised in the previous quarter.

The investment trend extends beyond technology companies purchasing computing equipment. Data centre construction also requires buildings, electrical infrastructure and other supporting systems, creating demand across parts of the construction and industrial supply chains. The extent of that demand, however, cannot be quantified from the GDP forecast alone.

The spending boom has also contributed to higher imports. September’s advance trade indicators showed that the US goods trade deficit widened as demand for capital goods associated with AI investment helped push imports to a record high.

Imports are subtracted in the calculation of GDP. Economists estimated that the trade shortfall could have reduced third-quarter growth by at least four percentage points, making it a significant counterweight to domestic investment and consumption.

Consumer spending remains a major growth driver

Household consumption was expected to provide another important source of support for the US economy.

Consumer spending was projected to grow at an annualised rate above 3% in the third quarter, following growth of 3.8% in the April-June period.

Relatively low layoffs, continued wage gains and spending by higher-income households supported by stock-market wealth were among the factors underpinning demand.

However, the resilience of consumption presents a contrast with weaker consumer sentiment and concerns about the cost of living. Higher food and energy prices have placed pressure on household budgets, while average US petrol prices remained above $4 a gallon amid the conflict involving the United States, Israel and Iran, according to the Reuters report.

Economists also warned that consumers could become more cautious if elevated energy costs persist. Households have been drawing down savings to sustain spending, raising questions about how long consumption can continue at its recent pace.

For businesses, the outlook matters because household expenditure influences demand across retail, travel, consumer goods and other service industries. Strong aggregate spending does not necessarily mean that all households or sectors are experiencing the same conditions.

Trade deficit and housing costs create economic headwinds

The widening trade deficit was expected to offset a substantial portion of the growth generated by domestic spending and investment.

Imports of AI-related capital goods can increase business investment while simultaneously weighing on measured GDP through the trade balance. This distinction is important when assessing whether strong technology expenditure is translating into domestic production.

Housing was another area of weakness. Higher mortgage rates were expected to push residential investment back into contraction during the third quarter.

Land and labour shortages, alongside higher construction material costs associated with import tariffs, were additional constraints on homebuilding. These pressures could limit activity in residential construction even as investment in data centres supports parts of the wider construction sector.

Economists also anticipated a contribution from inventory accumulation and a rebound in government spending. The combined effect of these components would help determine the final GDP estimate.

Federal Reserve faces strong growth and elevated inflation

The economic outlook presents a challenge for the Federal Reserve as it balances economic activity against persistent inflation.

On 28 October, the US central bank kept its benchmark federal funds rate in a target range of 3.75%-4.00%, while acknowledging that inflation remained elevated. The decision followed a period of strong domestic spending and continued investment.

GDP growth above the approximately 2% pace that some Fed officials regard as consistent with non-inflationary expansion could complicate the policy outlook, particularly if demand continues to place pressure on prices.

However, the third-quarter GDP forecast alone does not establish the future direction of interest rates. Inflation, employment, financial conditions and subsequent economic data will also influence the Federal Reserve’s decisions.

Higher borrowing costs would be relevant to businesses financing data centres, AI equipment and other capital-intensive projects, as well as to households facing mortgage and consumer credit expenses.

AI investment raises questions about long-term returns

Despite the near-term contribution to economic activity, the sustainability of AI-related investment remains an important consideration.

Technology companies have borrowed substantial sums to finance AI projects, while investors have increasingly scrutinised the cost of long-term infrastructure commitments and the uncertain returns they may generate.

A reduction in planned expenditure could affect equipment suppliers, data centre developers, construction contractors and other businesses exposed to the investment cycle. The scale of any such effect would depend on the size and timing of changes in spending.

For now, economists cited by Reuters did not expect concerns about AI investment returns to derail the broader expansion in the third quarter. Nevertheless, the relationship between capital expenditure, productivity gains and future revenue will be important in evaluating the durability of the investment boom.

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