The U.S. economy grew at a yearly rate of 3.4% in the third quarter, up from 2.2% in the second quarter, while annual inflation measured by the PCE price index rose to 3.6% in September, well above the Federal Reserve’s 2% target.
The Bureau of Economic Analysis said its advance estimate of gross domestic product (GDP) showed gains in consumer spending, investment and government spending, partly offset by lower exports. Consumer spending grew at a yearly rate of 3.8% in the quarter. Business investment also strengthened, including a sharp rise in spending on equipment used to process information.
The GDP figure is an estimate stated as a yearly rate, and the BEA plans to update it in later releases. The PCE price index rose 0.5% in September from August. Excluding food and energy, prices were up 3.1% from a year earlier.
Household spending rose 0.5% in September. Personal income rose 0.2%. After adjusting for inflation, personal consumption was almost unchanged that month.
Strong growth and persistent inflation present policymakers with a mixed picture. Demand remains strong, but prices are still rising well above the Fed’s goal. The reports came one day after the Fed kept its benchmark interest-rate range unchanged at 3.75% to 4%.