U.S. Economy Grew 3.4 Percent in the Third Quarter - and September Inflation Rose to 3.6 Percent, Driven by a 9.2 Percent Jump in Energy Prices
The BEA's twin Thursday release gives the final weekend of the midterms its economic shape: growth beat forecasts, and the month's inflation came disproportionately from the fuel pump.
WASHINGTON - The U.S. economy grew at a 3.4 percent annualized rate from July through September, the Bureau of Economic Analysis reported Thursday in its advance estimate - faster than the second quarter's 2.2 percent and above the 3.1 percent economists surveyed by Dow Jones had expected. In current dollars, output grew 5.6 percent, and business equipment spending was led by computers and related components. It is the first of three BEA estimates for the quarter; the second, with corporate profits, is scheduled for November 25.
The same morning's inflation report pointed the other way, and its driver is the one Houston households feel first. The personal consumption expenditures price index - the Federal Reserve's preferred gauge - rose 0.5 percent in September and 3.6 percent from a year earlier, up from 3.4 percent in August, the BEA said. Excluding food and energy, core PCE rose 0.3 percent in the month and 3.1 percent over the year. September's acceleration came largely from energy: prices for gasoline and other energy goods jumped 9.2 percent in the month, and overall energy goods and services climbed 5.4 percent, according to CNBC's report of the release. Consumer spending rose 0.5 percent in current dollars - $113.1 billion, split between goods and services - which the month's inflation nearly erased in real terms; personal income rose 0.2 percent and the saving rate stood at 3.8 percent.
The two timeframes in the release tell different stories, and the story carries both. Measured across the whole third quarter, PCE prices rose at a 2.1 percent annual rate, sharply slower than the second quarter's 5.0 percent, with core at 2.5 percent, down from 3.3 percent - a cooling quarter with a hot final month. The reports landed one day after the Federal Reserve held its target range at 3.75 to 4.00 percent, with inflation still more than a point and a half above the Fed's 2 percent target, and they are the last full economic picture voters get before Tuesday's midterm elections.
