U.S. growth reaches 3.4% as September PCE inflation stays firm
The advance GDP estimate shows stronger growth. A separate monthly report puts headline inflation at 3.6% over the past year.
The U.S. economy grew at a 3.4% annualized rate in the third quarter, up from 2.2% in the second, the Bureau of Economic Analysis said Thursday. The advance estimate beat the 3.1% forecast cited by CNBC. A separate release showed September inflation remained firm rather than disappearing as growth improved.
The personal consumption expenditures price index rose 0.5% in September and 3.6% from a year earlier. Excluding food and energy, core PCE prices increased 0.3% for the month and 3.1% over the year. CNBC reported that both core readings matched expectations.
Growth and prices tell different stories
Investment, consumer spending and government spending contributed to the rise in real GDP. Falling exports partly offset those gains. Real final sales to private domestic purchasers, which combines consumer spending and gross private fixed investment, rose at a 4.9% annualized pace, compared with 4.6% in the second quarter.
The monthly spending report carries an important distinction. Spending in current dollars rose 0.5% in September, but inflation-adjusted spending increased less than 0.1%. A larger dollar bill is not the same thing as a similar increase in the volume of goods and services purchased.
Keep the periods straight
The third-quarter GDP figure is an annualized growth rate, not a 3.4% increase in just three months. BEA put the actual quarterly increase at 0.8%. This is also an advance estimate, subject to revision.
The quarterly PCE price index rose at a 2.1% annualized rate, with core prices up 2.5%. Those quarterly measures are not the same as September's monthly or year-over-year readings. A cooler quarter-wide pace can coexist with a firm final month.
The releases follow Wednesday's Fed rate hold. They supply new evidence for the next policy decision, not a guarantee of a particular rate move. Our morning briefing set out the release calendar before the numbers arrived.
