“The headline is not indicative of how solidly the U.S.is growing”, said Gennadiy Goldberg, US rates strategist in New York with TD Securities, who correctly projected the third- quarter gain. But GDP could print slightly higher after data on Wednesday showed a smaller-than-expected goods trade deficit in September. The Commerce Department will release its advance third-quarter GDP estimate on Thursday. The central bank said the economy “has been expanding at a moderate pace”, while explicitly noting that will consider a rate increase at the next policy-making meeting. This week, it decided once again not to raise interest rates, pushing off that decision until December. Though the pace of hiring weakened over the past two months, steady job growth has helped shrink the unemployment rate to a seven-year low of 5.1 percent.
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Prices: Prices of goods and services purchased by United States residents – gross domestic purchases prices – increased 1.3% in the third quarter after increasing 1.5% in the second quarter. “Much of the weakness stemmed from the onset of a long-awaited correction to private inventories”, said Nariman Behravesh, chief economist at IHS. Exports grew in the third quarter but at a subdued pace, likely reflecting weaker foreign demand.
The study also noted, “Since the start of the recession in December 2007, real health spending (using the GDP deflator) through July 2015 has increased by 23.6 percent (an annual rate of 2.8 percent)”. A better gauge of the trend in current economic activity is final sales of domestic products, which held quite well at 3.0 percent. This was in-line with the consensus estimate, with real GDP slowing from reduced inventory spending and a continued drag from net exports. Partly offsetting these contributions to GDP growth, private inventory investment fell, mainly in wholesale trade and in manufacturing.
Despite strong domestic demand, inflation retreated because of dollar strength and cheaper petrol. Excluding the biggest swing in inventories in four years, the pace of growth was 3 percent compared with 3.9 percent in the previous three months.
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Stripping out food and energy prices, core PCE prices rose 1.3 percent, well below the Fed’s 2.0 percent inflation objective.
