Solid Real GDP Growth in Q3

The US economy likely grew at a 3.3% annual rate in Q3. This strength, however, is heavily concentrated in AI and data centers. Excluding this tech boom, the broader economy shows tepid growth, potentially weakening further if the Fed continues hiking rates.

Business investment was particularly strong, showing the fastest growth since 2011. This surge, alongside solid consumer spending on services and autos, contributed significantly to GDP. Watch for the preliminary trade report Wednesday, as a soaring deficit is currently projected to subtract 3.2 percentage points from Q3 growth.

Residential construction and government purchases also added to GDP, though home building faces headwinds. Businesses are also rebuilding inventories after a prolonged drawdown. The key takeaway remains the stark divergence between the AI sector's rapid expansion and the rest of the economy's slower pace.