U.S. output expanded at a 3.4% annualized pace in the third quarter, while real final sales to private domestic purchasers rose faster and September PCE inflation remained above the Fed's 2% goal.
The Bureau of Economic Analysis (BEA) said gross domestic product increased at a 3.4% seasonally adjusted annual rate in the July-September quarter, equivalent to 0.8% from the previous quarter. Growth was 2.2% at an annual rate in the second quarter. Real final sales to private domestic purchasers climbed 4.9% at an annual rate, compared with 4.6% in Q2. The measure tracks consumer outlays alongside private fixed investment, offering another view of domestic demand.
Investment, consumer outlays and government purchases lifted GDP, partly offset by falling exports, according to the BEA. Within equipment investment, gains came chiefly from information-processing goods, including computers and peripheral equipment.
In September, real personal consumption expenditures (PCE) were unchanged from August to one decimal place. Spending measured in current dollars increased 0.5%. The PCE price index rose 3.6% from a year earlier. Core PCE inflation, which excludes food and energy, was 3.1%. The Fed's stated inflation goal is 2%.
The Federal Open Market Committee voted 10-2 on Oct. 28 to keep the federal funds target range at 3.75%-4.00%. The Fed described economic activity as strong, domestic spending as resilient and inflation as elevated. Lisa D. Cook and Beth M. Hammack dissented in favor of a quarter-point rate increase.
FXStreet reported Oct. 30 that TD Securities economists Oscar Munoz and Eli Nir see sustained consumer spending and AI-related investment as risks to a smooth return to the inflation goal. The report attributed to them a forecast for fourth-quarter GDP growth at a 2.3% annualized rate and 50 basis points of additional tightening by the first quarter of 2027.
The BEA is scheduled to release its second estimate of third-quarter GDP and October personal income and outlays on Nov. 25 at 8:30 a.m. ET. The Fed's next meeting is scheduled for Dec. 8-9.
