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Posted on 10/25/2026 9:05:29 PM PDT by SeekAndFind
The American economy is showing remarkable resilience despite persistent inflation, high interest rates, and geopolitical uncertainty.
The Federal Reserve Bank of Atlanta estimates that the economy grew at a 3.5% annualized rate during the third quarter of 2026, well above what many economists once considered sustainable.
Yet there is a growing disconnect between the economy’s impressive performance and the financial reality facing everyday Americans.
Economists had expected the U.S. economy to slow as higher energy prices, tariffs, and rising borrowing costs weighed on consumers and businesses.
Instead, consumer spending has remained resilient, companies have continued investing, and technological advances have helped businesses operate more efficiently.
The economy expanded at a 2.2% annualized rate during the second quarter, according to the Bureau of Economic Analysis. The Atlanta Fed’s latest estimate points to even stronger growth in the third quarter, although the official figures have yet to be released.
One of the biggest drivers has been a surge in business investment, particularly in artificial intelligence, automation, and advanced computing.Start Investing
These investments are helping companies increase productivity, reduce operating costs, and generate higher profits. They could also support economic growth for years to come.
For decades, economists believed the U.S. economy could sustain annual growth of roughly 2% without generating excessive inflation.
Artificial intelligence could help push that ceiling higher.
Businesses are investing billions of dollars in AI infrastructure, software, data centers, and automation systems. The goal is to produce more goods and services with fewer resources.
The early productivity numbers are encouraging.
According to the Bureau of Labor Statistics, labor productivity increased 2.2% in the second quarter of 2026 compared with a year earlier.
Higher productivity is important because it allows businesses to grow without necessarily increasing their workforce or operating expenses at the same pace.
For investors, this creates opportunities across technology, semiconductors, infrastructure, and companies successfully integrating AI into their operations.
However, the long-term economic benefits will depend on whether AI investments generate meaningful returns and whether productivity gains spread beyond the largest technology companies.
Despite strong economic growth, many households are struggling to keep up with everyday expenses.
The biggest problem is inflation.
Prices for goods and services are roughly 30% higher than before the pandemic, according to the figures cited in the economic analysis. Even though inflation has slowed from its earlier peaks, prices remain substantially elevated.Read Economics
And inflation has recently accelerated again.
The Consumer Price Index increased 3.7% over the 12 months ending in September 2026, according to the Bureau of Labor Statistics.
Meanwhile, average hourly earnings increased just 3% over the same period. After accounting for inflation, real hourly wages fell 0.7%.
That means the average worker’s purchasing power has deteriorated over the past year, even as the overall economy continues growing.
Higher costs for housing, groceries, healthcare, insurance, and energy are placing additional pressure on household budgets.
For many Americans, impressive GDP numbers offer little comfort when their paychecks aren’t stretching as far as they once did.
Another important factor is the growing concentration of wealth and consumer spending.
The stock market’s gains, particularly among major technology companies benefiting from AI investment, have significantly increased household wealth.Start Investing
But those benefits are distributed unevenly.
Affluent Americans generally own more stocks and other financial assets, allowing them to benefit disproportionately from rising markets.
This additional wealth encourages spending on travel, restaurants, luxury purchases, and other discretionary expenses.
Economists call this the wealth effect, and it has become an important source of support for the economy.
Lower- and middle-income households face a different situation. Many have limited stock market exposure and depend primarily on wages to cover rising living expenses.
The result is an economy increasingly supported by wealthier consumers, while financially stretched households have less room for discretionary spending.
This division creates a potential vulnerability. If stock prices decline significantly, the spending power of affluent households could weaken, reducing an important driver of economic growth.
The economic outlook presents both opportunities and risks.
Technology and AI stocks: Companies developing AI infrastructure and applications could continue benefiting from business investment. However, elevated valuations make future earnings growth especially important.Start Investing
Consumer stocks: Businesses serving affluent customers may remain better positioned than companies dependent on financially pressured households. Consumer spending trends could become increasingly important when evaluating retail and discretionary stocks.
Interest rates and bonds: Strong economic growth may give the Federal Reserve less reason to lower interest rates, particularly while inflation remains elevated. Higher rates can pressure bond prices, borrowing activity, and stock valuations.
Corporate earnings: Improving productivity could help businesses maintain strong profit margins despite higher costs. Investors should watch whether earnings growth broadens beyond technology and other large companies.
There is also a less obvious possibility: Continued productivity improvements could eventually help reduce inflation pressures by lowering the cost of producing goods and services.
That would be an especially favorable outcome for investors, potentially allowing economic growth to remain strong while giving the Federal Reserve greater flexibility on interest rates.
The next several months should provide greater clarity about whether America’s economic expansion can continue.
1. Third-quarter GDP: The government’s October 29 report will show whether economic growth is meeting expectations and whether consumer spending and business investment remain strong.Start Investing
2. Inflation and wage growth: Americans need wages to grow faster than prices for the economic expansion to translate into meaningful improvements in living standards.
3. AI productivity and corporate earnings: Investors should look for evidence that AI investments are delivering measurable efficiency gains and sustained profits across a broader range of industries.
These indicators will help determine whether strong economic growth can eventually translate into wider financial gains.
The U.S. economy has proven considerably stronger than many economists expected, and advances in artificial intelligence could support continued growth through the remainder of the decade.
But the benefits remain uneven.
Corporate profits, rising stock prices, and technological investment are helping power the expansion, while inflation continues to undermine the purchasing power of millions of Americans.
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They’re over spent several paychecks ahead.
Can’t really fix stupid.
Give ‘em $100,000, and they’ll be in the same place in four years.
Tax cuts were not popular, do not reward work, code is too steep. Here is what USA needs: Replace payroll tax by a 20% national sales tax, including on gasoline & services like cell phone, cable, satellite, uber, door dash, etc….& replace the corporate income tax by a 5% VAT, which eliminates 21%-+ tax on exports, & puts 5% tax on imports.
No income tax on the first $100,000 income. ..rewards work, savings, investment without gimmics, dumb child tax credits for unwed mothers or illegal immigrants, etc. No tax deductions.
17% income tax bracket at $100,000 income, 25% income tax bracket at $1 million income, 33% income tax bracket at $10 million income, 41% income tax bracket at $100 million income. Tax capital gains ( indexed for inflation) —& dividends as regular income.
Simple, fair, rewards work. Progressive. Treats educated hardworking professionals & business owners fairly, as working people, and not in over 30% income tax brackets like idiot Republicans and Trump do with their “ biggest tax cuts in history) garbage. Only Trump’s corporate income tax cut is good, but doesn’t go far enough and is unfair. Instead of letting corporations deduct dividends as a cost of doing business and taxing dividends as regular income, Trump is taxing dividends at only 15% on top of the 21% effective corporate income tax rate…..but corporations get all sorts of income tax deductions that individuals don’t get, eg, corporation owned air b n b get to deduct everything residential owned homes don’t get to deduct, roofs, hot water heaters, air conditioning systems, furniture, broken walls, landscaping, etc.
Ones and the many. That’s why.
You wouldn’t know it by seeing the crowd at Carrabas restaurant tonight and several sports bars we passed. The restaurant was packed. We had to wait 30 minutes for a table.
Impossible to answer w/o examining everyone’s budget >> Income vs spending. Spending >> Mandatory vs elective.
15%-20% of quarterly GDP growth is from “AI Slop” spending. When the AI bubble bursts we will have a better view of GDP growth/economic activity.
AI infrastructure (data center) construction only affects a small percentage of “Main Street” Americans in positive economic way. (Electricians/electrical engineers/welders doing well).
https://www.stlouisfed.org/on-the-economy/2026/jan/tracking-ai-contribution-gdp-growth
The grocery store at which I shop prints out a “help wanted” statement on every receipt.
The Target a few miles away has a job application table set up right near the front door.
Same with the WalMart. There are bums begging every day in at the entrance to its parking lot.
Trump has fowled up a number of things especially the economy and catering to these fat cat investors has not helped the GOP.
Maybe so but hard to live on barely above minimum wage Trump economy.
Rich get richer and the working class, well they barely hang on... I had high hopes Trump would focus on the Working class but he has cozied up to the rich and heck with the workers..
What is “growth?”
Who is growing? Stock prices grow from a tweet or social media post. “Influencers” grow vapor companies that produce nothing. Nearly every software company has “grown” busy switching everything to subscription. It is all vapor. Wages sure aren’t growing. I saw three skilled manufacturing jobs offer 16 to 25 an hour. The grocery store pays more for stockers. We are in heaps of trouble and if it happens under Trump’s administration we can look forward to a democrat party rule in perpetuity.
Prepare accordingly.
A damaged “chain distribution” problem first surfaced during the AutoPen Administration.
Haven’t been out to eat now since 2007… except one time about 5 years ago to Caracas because my boss took us out, and once this year where we plunked down a ridiculous 57 dollars for mediocre seafood.
A box of 12 tacos at Taco Bell is about 27 bucks now. Insane.
Would be nice to go out to eat, but going out to eat is a luxury.
Everything is a luxury now except milk, eggs and bananas.
Going to the supermarket and filling up gas is eating up a lot of discretionary money. That is why people are unhappy as a whole. Yes, I understand people on free Republic are thrilled with the economy and could care less about the cost of gas and groceries and how the economy is going. unfortunately, a super majority of the people are not in our minority.
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