US Growth Quickens as Inflation Runs Hot in Last Big Report Before Midterms
The United States economy delivered its last major snapshot before the November 3 midterm elections on Thursday, and it showed growth quickening while inflation moved further from the Federal Reserve’s goal. Gross domestic product grew at a 3.4 percent annualized rate in the third quarter, the Commerce Department reported, while the personal consumption expenditures price index rose 3.6 percent over the year in September.
The growth figure beat expectations. Economists had forecast a 3.1 percent annualized rate, after 2.2 percent growth in the second quarter. Real final sales to private domestic purchasers, a measure that strips out inventories, trade and government spending, rose at a 4.9 percent annual pace.
The inflation side of the report was hotter. The headline personal consumption expenditures price index rose 0.5 percent from August, the biggest monthly gain in six months, lifting the annual rate to 3.6 percent from 3.4 percent. The core index, which excludes food and energy, rose 0.3 percent on the month and 3.1 percent over the year, up from 3.0 percent.
The personal consumption expenditures index is the gauge the Federal Reserve uses for its 2 percent inflation target, and it has run above that target since 2021. The core reading matched economists’ expectations, while the headline rate also came in as forecast.
Household finances showed a cooler edge. Personal income rose 0.2 percent in September, and consumer spending rose 0.5 percent, but adjusted for inflation, spending was flat from the month before.
The reports landed a day after the Federal Reserve held interest rates steady at 3.75 percent to 4.00 percent, with two officials, Lisa D. Cook and Beth M. Hammack, preferring a quarter-point increase. Traders put the odds of a December rate increase at around 83 percent, according to market pricing, which reflects investor bets rather than guidance from the central bank.
The personal consumption expenditures index is a different measure from the consumer price index, which rose 3.7 percent over the year in September. The two gauges cover different baskets of goods and services and are compiled from different data.
