The U.S. Economy Has Its Best Quarter in a Year

The US economy grew at its fastest pace in a year this summer, despite higher gas prices and inflation worries. "It's a crazy high share for just high tech or a high related investment to contribute to GDP growth, and it's not quite in the same levels consumer spending, which is still the biggest factor, but it's almost there." Plus, it was the ugliest day ever for Alphabet shares, which wiped out half a trillion dollars in market value, and some of the voters who elected Trump in 2024 are now up for grabs. Who are they? We'll get into it. It's Thursday, October 29th. I'm Alex Ocelep for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that moved the world today. As you heard this morning, investors are worried about Google's search business slowing as AI reshapes how people search the internet. The challenge for Google how to remake its cash cow search business around AI without cannibalizing ad dollars. That worry led to Alphabet stock suffering its worst day ever today, dropping almost 13% and erasing about $500 billion in market value. That also put the stock on pace for its worst monthly performance since the depths of the financial crisis. Alphabet's decline weighed on the broader markets by increasing fears today that the costs of the global AI build out may be outrunning the returns. The NASDAQ dropped 1.4% while the Dow and the S&P also closed lower. In other business news, DoorDash has struck the biggest deal in its 13-year history. The gig delivery company is buying Instacart for about $17 billion in cash and stock. The deal adds a major grocery delivery partner to DoorDash's growing collection of services. It's already been growing beyond restaurant delivery. DoorDash delivers dresses from maces, paper towels from Costco and cold medicine from CVS, and buying Instacart gives DoorDash a stronger ability to compete with Walmart and Amazon. DoorDash said it expects to keep Instacart's brand and app after the deal closes, which is expected in late 2027 or early 2028. DoorDash shares rose more than 5%. In political news, Alaska's Republican governor Mike Dunlivi has ordered an investigation into alleged election manipulation in the state's Senate race, complicating Democrats efforts to win the seat just days before the midterm elections. The probe comes after the New York Times reported that campaign staffers for Democratic candidate Mary Peltola worked to recruit an independent challenger, with the same name as the incumbent Republican Senator Dan S. Sullivan. Critics say the effort to put two Dan Sullivan's on the ballot was designed to confuse voters. President Trump earlier called for Peltola to be criminally prosecuted. The journal has learned that today the Justice Department sent dozens of new grand jury subpoenas in the existing federal criminal investigation into the race. A department official said prosecutors are exploring whether to bring charges alleging a conspiracy to violate the rights of voters. Peltola's campaign, meanwhile, says it has had "no involvement with either Sullivan campaign." The Alaska race is a close contest and one of the most closely watched in the country, and it's not yet clear whether the incident will change voters minds. Speaking of undecided voters, they're not as common as they used to be. But across the US, that crucial subset of voters might be the ones to decide the outcome of this election. Journal National Political Reporter Eliza Collins is here down to discuss. Eliza, I actually want to start by jumping back to 2024 to the coalition that elected President Trump. What were some of the groups that made up that coalition and what was so special about it? So when Trump was elected in 2024, he did better than when he was first elected in 2016. And that was because he did better with basically every demographic group. So of course, his Republican base was there, but he also pulled back in traditional swing voters. So those would be independent voters, suburban moms. They came back to Trump after leaving him in 2020, but he also did better with young voters, particularly young men, Hispanic voters. He did better with black voters. He had this new coalition of Maha voters. So Trump just really built out this coalition that allowed him to win all the swing states and do better than he had done before. So let's fast forward now to where we are in 2026. That coalition seems like it might not be a sure abet for Republicans in this election. What are some of the groups that are more up in the air now than they were in 2024? I think most of those groups, besides Trump's base. Now up in the air is the key word. They could come home, especially in some of these really competitive races. Some of the races we're looking at as toss-ups, especially on the set outside, are in double digit Trump states. So we're talking about Alaska, Iowa, Texas. These are states that Democrats normally would have no business playing in and are seen as toss-ups. Maybe at the journal I'll spend a lot of time talking to these voters. Hispanic voters, for example, especially in a place like Texas, there are a lot of signs that they are souring on the president, particularly because they feel like his immigration and border security agenda has gone too far. So they wanted some border security. They are not happy with the deportations. I have personally talked to Maha voters. That coalition is fraying over frustrations of some things that the administration has done, including protections for pesticide makers, some environmental rollbacks. And then we recently did a panel with young Gen Z voters who had all voted for Trump. Half of them said they regretted their vote. I'm seeing candidates like Zoran Mamdani, the new Michigan Senate candidate. These are the candidates that I want to represent America. And I'm willing to compromise my Republican values and say, "Look, I don't care if you're a Democrat or a Republican. I have a vision for America. We share the same visions. Let's cross these bipartisan divisions and work together to rebuild our system." So we're seeing a shift really the entire coalition at this point I think is up for grabs. Are there other groups that were solidly in Trump's base that are now a little more up in the air? Yeah. So farmers are a new swing vote. This cycle that I think we would not have thought about previously. They have gotten hit really hard by multiple policies, but in particular the tariffs. And so those states, the Iowa Senate race and Iowa governor's race are seen as highly competitive Kansas, which has not elected a Democrat in decades and decades, is seen as highly competitive. These were people that I don't think we would have said in 24 were sort of new swing voters. But given Trump's approval rating just across the board with every demographic group has really plummeted, I think it's very difficult for Republicans to make the case to these voters particularly on the economy. And voters say the economy is hurting them. When we're out talking to voters, they're pointing directly to policies the president has put in place. So for example, people are saying things cost more because of the tariffs. The war with Iran is a huge one that people are directly connecting to higher gas prices. Trump won in 2024 because he made the case that the economy was going poorly under Biden. When Republicans have the White House, the House and the Senate, it's much harder to make the pitch that the economy is someone else's fault. That was WSJ National Political Reporter Eliza Collins. Thank you, Eliza. Thank you. Coming up, the Cheesecake Factory's decor may be the butt of the joke, but it's also key to the restaurant chains its success, that story, and more after the break. U.S. economic growth picked up steam over the summer. New data out from the Commerce Department today showed that GDP rose at a 3.4 percent annual rate in the third quarter. It was the fastest pace in a year and it beat analyst expectations. WSJ Economics reporter Conrad Puthir is here down to discuss. Conrad, we've been hearing so much about high gas prices and affordability. Concerns that could hurt consumer spending and other parts of the economy too. What drove GDP over the summer? Yeah, it's ironic, right? Because consumers are really feeling the pain from inflation. We keep hearing that people feel bad about the economy and he had Americans keep spending and it was the single biggest contributors to GDP growth that was surprisingly big in this past quarter. The second thing that we have to talk about is business investment and specifically AI investment, which has already been a big driver of growth and it really went off the charts in this most recent quarter. According to some estimates, it accounted for one-third of GDP growth. It's a crazy high share for just high tech or a high related investment to contribute to GDP growth and it's not quite in the same levels consumer spending, which is still the biggest factor, but it's almost there and that by itself is wild. Meanwhile, there was another piece of data that came on as part of this report that showed that the U.S. national debt reached 100 percent of GDP. That's the first time it hit that triple-digit mark since 1946. What does it mean for the economy? The budget deficit has been talked about for years and years and years. It's just incredibly high for an economy that's in peacetime. It's not a nervous session. You mentioned the highest since 1946, right? Just to remind people what happened in 1946, 1946 was right after World War II. The reason government debt was so high is because it costs so much money to fight in the war and now we're back at that level basically at a time when there is thank God no-world war happening and of course it's not sustainable in the long run and at the same time it's also been a driver of economic growth. What the deficit basically means is the government is spending more than it collects in taxes and that's what it's about. additional spending at the economic growth. I want to shift now to talk about what all of this means for the Fed. Yesterday, of course, the Fed held interest rate steady, but does this latest data reinforce investor's expectation that the Fed will raise rates at its next meeting? Kevin Worsh, the Fed chair yesterday, gave a press conference where he basically said he thinks the economy is strengthening and is doing great. It certainly does reinforce this view that the economy is running pretty strongly. Consumers keep spending despite rising prices. And inflation is still way too high. Right? It's like way above the Federal Reserve's target. And so if you take all those things together, what it basically indicates is that there's a good chance that interest rates right now are just not high enough to bring prices down. And that basically means there's a good chance the Fed will decide to raise rates at its next meeting. Journal Economics reporter Conrad Pootsier, thanks so much. Thanks for having me. And in Europe, Christine Lagarde is stepping down a few months early as president of the European Central Bank. She'll leave her role in February. She told reporters today that her decision was informed by wanting to speak more openly about world affairs. European countries have already begun jockeying over who will succeed her at a time when debt problems and research and inflation are looming over the economy. Shortly after Lagarde's announcement, the ECB said it was holding interest rate steady, though investors widely expect that the bank, like the Fed, will raise rates at its next meeting in December. And finally, elections are always a time when Americans remember the things they don't agree on. But for a moment, consider the things they do. Costco, Dolly Parton, and apparently the cheesecake factory. That's part of why former president Barack Obama's jabs at President Trump at political rallies over the past few days have gotten a lot of traction. I heard the president was not happy when I joked over the weekend that he's got the White House looking like Saddam Hussein opened the cheesecake factory. Obama then made clear that he liked the restaurant and called it his quote, jam. I am the father of two daughters. Do you think I could have survived their childhood without going to the cheesecake factory? But what does his initial joke mean? Exactly. Adam Chandler reports on food trends for the journal and joins me now. Adam, I have not been to a cheesecake factory in a long time, but there used to be one near where I grew up in Maryland and that enormous spiral bound menu is like a visceral memory for my hand. How would you describe the aesthetic of a cheesecake factory? Well, it's sort of like that menu. It's overstuffed with all kinds of wonders. Gaudi sort of finishes and murals bright, soaring ceilings with paintings on them. It's a little chaotic, but it's timeless and it's chaos. The first cheesecake factory opened in Beverly Hills in 1978 and it has been very successful. I was surprised to learn from your story that it is the highest grossing major restaurant chain by average unit volume. What has made it so successful? The way that the decor and the menu kind of work together and being chaotic and fun really adds to the mystique of this place. There's something on the menu for everyone. The portions are enormous, the calorie counts are enormous, and I think people go there to have a good time. It's a very like early odds aesthetic in my mind. Why do I think that? It's kind of just a mishmash of different styles. You have European touches and you have Egyptian columns and then you have these gold finishes, and so the whole thing doesn't exactly fulfill one ideology, which I think is kind of where we were in the early odds. And because of this focus on the design, they don't really change it that often. You go in a lot of places and they change the decor every 10 years to keep up with the styles, but not the cheesecake factory. It looks pretty much the same whenever you go. Okay, and Adam, very important last question here. What is your go-to order at the cheesecake factory? So I get the Louisiana chicken pasta. It's not an authentic dish to anywhere, even Louisiana to be clear, but it's spicy and it will overfill you in a way that I really appreciate. So I'm an enormous fan of that. That was WSJ columnist, Adam Chandler. Thank you, Adam. Thanks so much for having me. I appreciate it. And that's what's news for this Thursday afternoon. Additional sound today, courtesy of Reuters. Today's show was produced by Danny Lewis with supervising producer Tali Arbel. I'm Alex, though, so left for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.