U.S. economic growth edged up as expected in the third quarter. Gross domestic product expanded at a 2% annual rate as consumer spending rose at its fastest pace since 2006, the Commerce Department reported in its most recent data release.
While consumer spending increased and business investment continued to expand, much of the rise in demand was met by overseas production and domestic goods continued to pile up in warehouses. This may lead to more tepid growth in the fourth quarter.
However, the economy is definitely recovering, it is just doing so at a very slow pace. The economy expanded at a 1.7% rate in the second quarter and third-quarter growth matched most economists' expectations.
The GDP report showed the Fed's preferred inflation measure, the personal consumption expenditures (PCE) index, excluding food and energy, rose at an annual rate of 0.8 percent in the third quarter. According to reports, this was the smallest increase since the fourth quarter of 2008 and well below the Fed's comfort zone for inflation.
A pick-up in consumer spending gave the economy a lift in the last quarter. Third-quarter growth in consumer spending, which accounts for 70 percent of U.S. economic activity, increased at a 2.6 percent rate after rising 2.2 percent in the prior period.
Analysts expect the Fed to announce treasury bond purchases of at least $100 billion a month on Wednesday. Bond prices rose on the premise of more "quantitative easing" from the Fed, while the dollar extended losses against the yen on the prospect the Fed will need to print more money.
