Strong US GDP Growth Comes With Higher Inflation

The US economy posted stronger-than-expected growth in the third quarter, but accelerating inflation added to the economic challenges facing President Donald Trump as the midterm elections take place.

Strong US economic growth and accelerating inflation have created a mixed economic outlook ahead of the November midterm elections. [Photo: Dollar General]

Real gross domestic product (GDP) increased at an annualized rate of 3.4% between July and September, beating market expectations, the US Commerce Department's Bureau of Economic Analysis (BEA) said.

The growth rate was higher than the 2.2% recorded in the second quarter.

The BEA attributed the expansion to increases in investment, consumer spending and government spending, partly offset by a decline in exports.

The figures presented a mixed picture for policymakers and voters, as stronger economic activity coincided with persistent price pressures.

The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, rose 3.6% year over year in September, up from 3.4% in August.

On a monthly basis, the PCE price index increased 0.5% in September, according to the BEA's report on personal income and outlays.

Core PCE inflation, which excludes volatile food and energy prices, rose 3.1% from a year earlier, compared with 3.0% in August.

The acceleration in inflation could complicate the Federal Reserve's efforts to bring price increases back toward its 2% target, particularly as the economy continues to expand.

The economic figures also come at a politically sensitive time for Trump.

Voters are set to cast ballots in the November 3 midterm elections, with inflation, household expenses and the broader economy among the central issues.

Democrats are seeking to regain control of both chambers of Congress from the president's Republican Party, making economic performance a significant factor in the election campaign.