Key Highlights

● Third-quarter GDP grew at its fastest pace in a year.

● The advance estimate was released on October 29, 2026.

● It beat economists' forecasts.

● The data appeared to confirm the Fed's upgrade to strong growth.

The U.S. economy grew at its fastest pace in a year in the third quarter, according to the advance estimate of gross domestic product released on Thursday, October 29. The annualized growth rate beat economists' forecasts and marked a clear acceleration from the second quarter.

The report landed one day after the Federal Reserve left its benchmark rate range unchanged and upgraded its description of growth from "solid" to "strong." The data appeared to confirm that assessment almost immediately.

Why strong growth means hike bets

Faster growth matters for Monetary Policy because it can keep demand, and therefore prices, running hot. The Fed is already worried about inflation. "But Inflation remains elevated," Chair Kevin Warsh said at his press conference. "The Committee will deliver price stability."

Other data released the same day added to the picture. The September personal consumption expenditures price index showed headline and Core Inflation at their highest levels since May, and initial jobless claims of 194,000 came in below the 202,000 expected. "Today's data strengthens the case for another rate increase in December," a Wealth advisor said.

By Friday, October 30, 2026, CME FedWatch data showed a December hike as the likely outcome, according to market data. Markets are pricing in more than half a point of hikes by mid-2027, according to LSEG data cited by market data.

Not every number was hot

The picture was not uniformly strong. Personal Income and spending both rose less than expected in September, and the savings rate fell from August. On Friday, the Chicago purchasing managers index slipped to 55.3 from 58.8, missing forecasts of about 56, though it stayed in expansion territory. The third-quarter employment cost index rose in line with expectations.

The Fed itself was split. The committee voted 10-2 to hold rates, with Governor Lisa Cook and Cleveland Fed President Beth Hammack preferring a quarter-point hike. The Fed had raised rates in September.

Officials lean hawkish

Fed speakers on Friday pushed in the same direction as the data. St. Louis Fed President Alberto Musalem said, "I judge that additional firming of monetary policy will be necessary, and soon." Dallas Fed President Lorie Logan said she wants at least two more quarter-point hikes, and Richmond Fed President Tom Barkin said, "I think the question though is pace."

Warsh was more guarded. "I don't believe in forward guidance absent exigent circumstances, absent a crisis," he said, adding, "I also don't believe in prejudging meetings. A lot of things can happen."

Strong growth was not enough to lift stocks on Friday. The S&P 500 fell 140.32 points to 7,580.07, and the Nasdaq Composite dropped 747.73 points to 25,437.00, its worst day since June 5, as an Intel (NASDAQ:INTC)-led chip selloff and worries about AI spending dominated. Gold fell $132.50 to $3,898.90 an ounce, a 52-week low, as traders repriced the rate outlook.

What to watch

The October jobs report on Friday, November 6, will show whether the labor market is keeping pace with the faster economy. a portfolio manager has called "the lack of Job growth" the "missing piece," according to market data. ISM Manufacturing and services surveys arrive earlier that week, and the midterm elections take place on Tuesday, November 3, ahead of the Fed's December meeting.