The US economy expanded at a 3.4 percent annual rate in the third quarter, the Bureau of Economic Analysis said in its advance estimate, accelerating from 2.2 percent in the second quarter. Current dollar GDP rose at a 5.6 percent rate. The increase reflected higher investment, consumer spending and government spending, partly offset by a fall in exports, while imports, which subtract from GDP, rose.
The demand detail was stronger than the headline. Real final sales to private domestic purchasers, the sum of consumer spending and gross private fixed investment that officials watch as the core of domestic demand, rose 4.9 percent, up from 4.6 percent in the second quarter. Investment was led by private inventories in wholesale trade and manufacturing and by equipment, above all information processing equipment. Consumer spending rose in both services, led by health care and food services, and goods, led by other nondurable goods including prescription drugs.
The same release carried a cooler quarterly price picture than the monthly September data published alongside it. The price index for gross domestic purchases rose 3.0 percent at an annual rate, down from 5.6 percent in the second quarter. The quarterly PCE price index rose 2.1 percent, down from 5.0 percent, and the core index excluding food and energy rose 2.5 percent, down from 3.3 percent.
For the rates market the tension is the point. The economy is growing well above the pace most officials associate with its long run potential, private demand is accelerating, and yet the quarterly inflation run rate slowed sharply even as the September monthly print, covered separately in this edition, moved the other way. That mix is why the December Federal Reserve decision remains a live tightening question rather than a settled hold, and why the second estimate on November 25, which adds corporate profits, is the next hard checkpoint.