The U.S. economy grew at a 3.5% annual pace in the third quarter, aided by a surge in exports and a big jump in military spending, the government said Thursday. Economists polled by MarketWatch had predicted gross domestic product would expand by a seasonally adjusted 3%. The increase in consumer spending, the main source of U.S. economic activity, slowed to a 1.8% annual pace from 2.5% in the prior quarter. Business investment on equipment, while up 7.2%, also decelerated, as did outlays on housing construction. Yet exports surged 7.8% while imports dropped 1.7%, making trade the biggest contributor to economic growth in the third quarter. A 10% jump in federal spending, mostly on Pentagon hardware, also bolstered growth. It was the biggest increase in federal spending since 2009, when the Obama administration put in place a huge economic stimulus package. Inventories, meanwhile, rose by a smaller $62.8 billion vs. $84.8 billion in the prior quarter and were a drag on growth. Inflation as measured by the PCE index rose at a 1.2% annual rate, down from 2.3%, as falling energy prices work to keep price pressures under wraps. The core PCE that excludes food and energy climbed at a 1.4% clip. The government will issue an updated look at GDP in another month.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.