U.S. GDP grew at a 3.4% annualized pace in the third quarter, beating forecasts, while September's annual PCE inflation reached 3.6%. Investment and consumer spending drove the growth, and the Fed held rates a day earlier.
U.S. economic output grew at a seasonally adjusted annualized pace of 3.4% in the third quarter, better than the 3.1% estimate and well ahead of the 2.2% in the second quarter. The Commerce Department also reported that prices kept rising faster than the Fed's 2% target.
Inflation stays above target in September
The personal consumption expenditures price index increased 0.5% in September, putting the annual rate at 3.6%. The monthly gain matched the Dow Jones consensus, while the annual rate came in 0.1 percentage point below it.
Core PCE, which excludes food and energy, rose 0.3% on the month and 3.1% on the year, in line with the consensus. On a quarterly basis, however, there was some good news: headline PCE prices rose 2.1% and core 2.5%, down from 5% and 3.3% in Q2.
Investment and spending drive the quarter
Investment did much of the work. Gross private domestic investment soared 19.4%, led by a 20.9% surge in equipment spending and an 8.4% jump on intellectual property products. CNBC links the growth to the artificial intelligence buildout, along with high levels of consumer and government spending.
Consumer spending rose 3.8% in the third quarter, the same pace as the prior period. Meanwhile, real sales to private domestic purchasers, a proxy Fed officials use for underlying demand, rose 4.9%, up from 4.6% in Q2.
ActionForex, citing the Bureau of Economic Analysis, puts the consensus at 3.2% and notes that weaker exports and higher imports partly offset the gain.
The Fed holds while data pours in
The reports arrived a day after the Federal Reserve voted to hold its benchmark interest rate in a range of 3.75%-4%. According to Fed Chairman Kevin Warsh: "The period right in front of us is information rich."
Still, CNBC says the data suggests the Fed could have more work to do. A Labor Department report showed initial jobless claims edged lower to 194,000 for the week ending Oct. 24, below the estimate for 200,000.
Sources: CNBC, ActionForex
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