The U.S. economy grew at a 3.4% annual rate from July through September, faster than the 2.2% pace of the spring, according to the government's first estimate of third-quarter GDP released Thursday, October 29. A separate report on household finances showed prices rising faster in September than in August, while income after taxes and inflation fell.
Growth picked up
Investment, consumer spending and government spending all rose in the quarter. Companies added to inventories and bought more equipment, led by computers and related gear, while exports fell. Consumer spending plus private fixed investment, a combination BEA reports as final sales to private domestic purchasers, rose at a 4.9% rate after 4.6% in the second quarter.
The result is in line with the outlook Federal Reserve Chair Kevin Warsh gave a day earlier, when he said growth in the quarter was "likely running above 3 percent" in his press conference opening statement. The Fed left its benchmark rate at 3.75% to 4% at that meeting, as Edit USA reported.
Prices rose faster in September
| Measure, change from prior month | August | September |
|---|---|---|
| PCE price index | 0.3% | 0.5% |
| Excluding food and energy | 0.3% | 0.3% |
| Spending after inflation | 0.5% | 0.0% |
| Income after taxes and inflation | 0.0% | -0.3% |
From a year earlier, the PCE price index rose 3.6% in September and 3.1% excluding food and energy. BEA's August report had put those rates at 3.4% and 3.0%, before this week's revisions to earlier months.
Over the whole July through September period, the PCE price index rose at a 2.1% annual rate, down from 5.0% in the second quarter. The monthly personal income and outlays report shows prices speeding up again in September.
What it means for households
Americans spent $113.1 billion more in September than in August, but after adjusting for higher prices, spending rose less than 0.1%. Income rose 0.2% before inflation, led by wages and government benefits such as Medicare, yet disposable income adjusted for prices fell 0.3%. People saved 3.8% of their after-tax income.
BEA's second estimate of third-quarter GDP and its October income and spending report are both due November 25.
