US economic growth probably picked up speed in the third quarter, as resilient household spending and artificial intelligence-related business investment more than outweighed the drag from higher oil prices caused by conflict in the Middle East.

That expected strength would contrast sharply with how households view the economy, as reflected in record-low approval ratings for President Donald Trump and a steep decline in consumer sentiment. The Commerce Department will release its preliminary estimate of third-quarter gross domestic product on Thursday, less than a week before Tuesday's midterm elections, which will decide control of Congress.

"People are very upset about high energy and food prices, and yet the fundamentals for consumers are still decent," said Gus Faucher, chief economist at PNC Financial. "We still have job growth, wage gains and there's the strong stock market that's supporting spending by high-income households, in particular, so consumers continue to increase their spending at a pretty steady clip."

GDP likely expanded at a 3.2% annualized rate last quarter, according to a Reuters survey of economists. The economy grew at a 2.2% pace in the April-June period. But the survey was carried out before Wednesday's release of September's advance economic indicators report, which showed the goods trade deficit widening as strong demand for capital goods tied to the AI spending boom drove imports to a record high.

Economists estimated that the trade shortfall subtracted at least 4 percentage points from GDP growth last quarter. However, that drag was probably softened by AI-related investment, with business spending on equipment expected to have recorded a third straight quarter of double-digit growth.

AI likely also contributed to spending on intellectual property products. Inventories are expected to have added to GDP growth last quarter as well.

Investors are increasingly focused on the rising costs of long-term AI projects whose payoff is uncertain. Technology companies have borrowed large sums over the past year for AI spending, a potential downside risk to equipment spending. Still, economists did not expect this to hold back the economy.

"There's likely to be more discretion when it comes to investment in AI, but the underlying momentum remains quite strong," said Gregory Daco, chief economist at EY-Parthenon. "AI-related investment is likely to remain a key pillar of US economic activity, even if there are some risks of pullbacks and some questions as to the return on all of its investment."

The economy is expanding at a pace well above what some Federal Reserve officials consider the non-inflationary growth rate of about 2%. The US central bank on Wednesday kept its benchmark interest rate in the 3.75%-4.00% range while acknowledging that inflation "remains elevated."

Economists expected the Fed to raise rates in December. Fed Chairman Kevin Warsh told reporters that "economic activity is expanding at a strong pace," noting that "while uncertainty remains, owing in part to geopolitical developments, domestic spending has been resilient."

Strong consumer spending anticipated

Consumer spending, which accounts for more than two-thirds of the economy, is projected to have risen at above a 3.0% pace after growing at a 3.8% rate in the second quarter. Historically low layoffs and moderate hiring are helping to support spending, though wage gains have at times lagged inflation.

Households have been saving less and tapping into their nest eggs to fund spending. With average gasoline prices still above $4 a gallon as the US-Israeli war with Iran drags on, economists anticipated that consumer spending would pull back.

"It appears that households made a judgment when the conflict began earlier this year that the run-up in energy prices would prove mostly temporary," said Stephen Stanley, chief US economist at Santander US Capital Markets. "That assessment may prove wrong, so consumers may need, at some point, to tighten their belts."

Rising mortgage rates because of the Middle East conflict are expected to have pushed residential investment back into contraction last quarter. Higher borrowing costs have overshadowed a moderation in house prices, putting homeownership out of reach for young adults.

Homebuilding is also being constrained by land and labor shortages amid an immigration crackdown, and higher prices for materials due to tariffs on imports. The construction of data centers to support AI likely lifted business investment in nonresidential structures after stabilizing in the second quarter. A rebound in government spending is anticipated.

A measure of domestic demand, which excludes inventories, trade and government, is expected to have surged last quarter. Final sales to private domestic purchasers grew at a 4.6% rate in the second quarter.

"The overall picture is that the economy is growing at a decent pace, but the primary factors are an AI-driven investment boom and consumption driven primarily by rising stock wealth," said Dean Baker, senior economist at the Center for Economic and Policy Research. "It's unclear how long this can continue, but this is not a very stable picture, nor a very positive one for most working people."