U.S. economic growth slowed much less than expected in the third quarter, according to a report released by the Commerce Department on Wednesday.
The Commerce Department said real gross domestic product increased by 1.9 percent in the third quarter after climbing by 2.0 percent in the second quarter. Economists had expected GDP growth to slow to 1.7 percent.
The stronger than expected GDP growth reflected positive contributions from consumer spending, government spending, residential fixed investment, and exports.
However, negative contributions from non-residential fixed investment and private inventory investment limited the upside along with an increase in imports, which are a subtraction in the calculation of GDP.
The slightly slower GDP growth compared to the previous quarter reflected a notable deceleration in consumer spending, which increased by 2.9 percent in the third quarter after spiking by 4.6 percent in the second quarter.
Decelerations in federal and state and local government spending also contributed to the slower growth along with a larger decrease in non-residential fixed investment.
Meanwhile, smaller decrease in private inventory investment and upturns in exports and residential fixed investment helped to limit the slowdown.
“The 1.9% annualized gain in third-quarter GDP, down only marginally from the 2.0% gain in the second, was a little stronger than we had expected,” said Andrew Hunter, Senior US Economist at Capital Economics.
He added, “But it still pushed the economy’s annual growth rate down to a near three-year low of 2.0% and should be enough to convince Fed officials to deliver another 25bp interest rate cut later today.”
On the inflation front, the report said the annual rate of growth in core consumer prices crept up to 1.7 percent in the third quarter from 1.6 percent in the second quarter.