U.S. GDP Jumps 3.4% as PCE Inflation Hits 3.6% — SkimNews
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- U.S. GDP grew at a seasonally adjusted annualized 3.4% in the third quarter, beating the 3.1% estimate after 2.2% in the second quarter; gross private domestic investment surged 19.4%, with equipment spending up 20.9% and intellectual-property products up 8.4% as the artificial-intelligence build-out drove investment.
- PCE price index rose 0.5% in September, putting annual inflation at 3.6%; the monthly gain matched consensus and was the largest since March, while quarterly headline inflation slowed to 2.1% from 5% in the second quarter and gasoline and other energy goods jumped 9.2% for the month.
- Core PCE rose 0.3% in September and 3.1% annually, both in line with consensus, while quarterly core inflation eased to 2.5% from 3.3% in the second quarter; the Fed generally treats core inflation as the better gauge of longer-term trends.
- Real sales to private domestic purchasers rose 4.9%, up from 4.6% in the second quarter; the Fed uses the measure as a proxy for underlying domestic demand.
- Consumer spending rose 3.8% in the third quarter at the prior period's pace; September spending increased 0.5%, below the 0.6% forecast, while personal income gained 0.2% against a 0.3% estimate.
- Fed held its benchmark interest rate at 3.75%-4% on Wednesday; Chairman Kevin Warsh called the period ahead "information rich," while the new inflation and growth data left the central bank with more work to do.
- Initial jobless claims edged down to 194,000 for the week ended Oct. 24, below the 200,000 estimate and near levels last seen in the late 1960s, showing that layoffs remained low.
Why it matters: The quarterly figures complicate the headline’s inflation emphasis: headline PCE slowed to 2.1% and core PCE to 2.5% from 5% and 3.3% in the second quarter. For the Fed, 3.4% GDP growth and 4.9% underlying-demand growth alongside 3.6% annual inflation leave a genuinely mixed policy picture.
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