MediumIV Macro Policy & Sovereign Debt29 October 2026, Thursday · 15:30 TRT (UTC+3)
US economy grows 3.4% in third quarter as core inflation quickens
US real GDP grew at an annualised 3.4% in the third quarter, according to the BEA's advance estimate of 29 October, up from 2.2% in the second. September data released the same day showed the core PCE price index rising to 3.1% year on year from 3.0%.
The BEA said investment, consumer spending and government outlays drove growth, while exports fell. Real final sales to private domestic purchasers, a gauge of private demand that strips out inventories and trade, accelerated from 4.6% to 4.9%. Information processing equipment, computers in particular, led equipment investment. The entire rise in government spending came from the federal line. The BEA attributed it to smaller Strategic Petroleum Reserve sales than in the second quarter and noted that this has no direct effect on GDP. Consensus was 3.1% according to ABC News and 3.2% according to Investing.com.
The quarterly price data were soft; the monthly data were not. In the third quarter the PCE price index slowed to an annualised 2.1% from 5.0%, and the core index to 2.5% from 3.3%. In September, however, PCE prices rose 0.5% on the month and 3.6% on the year, while the core index rose 0.3% on the month and 3.1% on the year. Personal spending increased by 113.1 billion dollars but income by only 54.5 billion dollars, pushing the saving rate down to 3.8%.
According to Investing.com, the US 2-year yield rose about 3 basis points to 4.729% from 4.701% before the release, while the 10-year was flat at 5.026%. CME FedWatch data cited by ABC News show markets pricing a roughly 85% probability of a quarter-point Fed hike on 9 December. The Fed held its range at 3.75–4.00% on 28 October in a 10–2 vote.
Talay assessment
Bottom line
The data strengthened both arguments for a December Fed hike on the same day. Demand is robust, with private final sales growing 4.9%, and core inflation climbed to 3.1% year on year in September. The fall in the quarterly price index reflects base effects from the second-quarter energy spike, while monthly momentum is turning up again. A saving rate down at 3.8% shows consumption outpacing income, which limits how far that pace can run.
Likely effects
- Fed December decisionNegativeWeeks
Pricing of a roughly 85% chance of a December hike gains ground, and the hawkish minority in the 10–2 vote is likely to widen.
- US front-end ratesNegativeWeeks
The 2-year yield rose to 4.729% on the release; November jobs and inflation data could sustain that move into December.
- Household budgetsNegative1–6 months
Spending rose by 113.1 billion dollars against 54.5 billion dollars of income; a 3.8% saving rate leaves consumers a thinner cushion against higher rates.
- TürkiyeNegative1–6 months
Strong US data keep the dollar and extended-maturity dollar yields elevated, so Türkiye's cost of rolling over dollar-denominated external debt stays high.
Possibilities, ranked
- 1Fed hikes in December65%
October inflation and payrolls stay firm, and the Fed lifts its range to 4.00–4.25% on 9 December.
Watch: October CPI and non-farm payrolls, and the CME FedWatch probability for December
- 2The pause extends25%
The low saving rate brakes consumption, November data soften and the Fed holds again in December.
Watch: October personal spending data and the saving rate
- 3Revisions weaken the case10%
The 25 November second estimate revises growth down sharply and December hike pricing fades.
Watch: The BEA's second GDP estimate on 25 November
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Real GDP (annualised)▲ 3.4%
- Core PCE (y/y)▼ 3.1%
- US 2-year yield▼ +3 bp