Economic Divergence: Internal Contrasts Beneath the Eye-Catching US GDP
2026-10-29 20:58:23
The U.S. Commerce Department recently released two core economic indicators: the PCE (Consumer Price Index), a measure of inflation favored by the Federal Reserve, rose again, while GDP growth accelerated significantly in the third quarter, presenting a complex picture of strong growth and persistent inflation. The PCE price index rose 3.6% year-on-year in September, up from 3.4% in August, and increased 0.5% month-on-month; the core PCE, excluding food and energy, rose 3.1% year-on-year. Both figures are significantly higher than the Federal Reserve's long-term inflation target of 2%. This round of inflation is directly related to the Iranian conflict pushing up oil prices. Since February, the U.S. CPI has climbed from 2.4% to 3.7%. Coupled with slowing wage growth, real hourly wages for U.S. residents have declined for six consecutive months, with low-income groups particularly affected by oil price increases. The employment situation is also mixed. The unemployment rate remains low, but job creation is weak, with only 29,000 new jobs added in September, far below market expectations. The annualized GDP growth rate in the third quarter reached 3.4%, higher than the 3.1% expected by Wall Street economists, compared to only 2.2% in the second quarter, indicating a significant acceleration in economic growth. A major pillar of this round of growth is AI-related capital expenditure, with large-scale data center construction continuing to drive commercial investment throughout the year. Goldman Sachs estimates that US AI-related investment is expected to reach 1.9% of GDP. Although much capital has flowed to overseas chip procurement, server factory construction has also created a large number of construction jobs domestically, offsetting the drag from the decline in residential real estate starts. The internal economic divergence is very pronounced. High-income groups benefited from the stock market boom, with strong demand for high-end consumption. Cruise line Royal Caribbean's orders and bookings continued to rise, with bookings in 2027 even exceeding historical levels. However, high interest rates severely impacted companies in the real estate supply chain; appliance giant Whirlpool predicted a full-year loss while also facing pressure from both raw material and fuel costs. The day before the data release, the Federal Reserve had just concluded its policy meeting, with most members voting to keep interest rates unchanged. Federal Reserve Chairman Kevin Warsh stated after the meeting that household consumption and business investment were driving economic strength, and productivity had also increased. When asked if the economy was overheating, he admitted that most of his colleagues did not believe the current economy was overheated. In the coming period, the Federal Reserve's focus will revolve around several key themes. First, the sustainability of core PCE, distinguishing whether inflation is a short-term disturbance caused by energy prices or a sustained rebound in endogenous inflation in the services sector. Second, the cyclical resilience of AI investment, currently the most important support for GDP; if computing power investment declines, economic growth could easily fall rapidly. Simultaneously, the Fed will continue to monitor the pace of cooling in the labor market and the lagged suppressive effect of high interest rates on real estate and durable goods consumption. Until inflation steadily approaches 2%, the Fed will retain the option to continue raising interest rates, relying entirely on subsequent data for policy decisions and not locking in a path in advance.
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