US economy grew 3.4% in Q3, above forecasts; September PCE inflation 3.6%, core 3.1%, in line
The Commerce Department's first estimate shows growth accelerating from 2.2% to 3.4% on consumer spending and investment, while the Fed's preferred inflation gauge rose 0.5% in September as energy prices jumped.
The Bureau of Economic Analysis released two key reports at 8:30 AM ET on Thursday: the first estimate of third-quarter GDP and September personal income and spending, which includes the PCE price index the Fed targets.
| Indicator | Actual | Forecast | Prior |
|---|---|---|---|
| Q3 real GDP (annualized) | 3.4% | 3.0% (FactSet, via AP) | 2.2% |
| September PCE prices, y/y | 3.6% | 3.6% | 3.4% |
| September core PCE, y/y | 3.1% | 3.1% | 3.0% |
On a monthly basis, headline PCE prices rose 0.5% and core 0.3%, both matching consensus as listed by Yahoo Finance before the release. Nominal personal spending rose 0.5%, real spending was flat, and the saving rate was 3.8%.
Why it matters: Growth beat expectations and the private-demand core of the economy (consumer spending plus business investment) sped up to 4.9%, helped by AI-related investment. But September inflation re-accelerated to 3.6% from 3.4%, driven by a jump in energy prices, and real (inflation-adjusted) spending was flat for the month. That mix strengthens the case of the two Fed officials who dissented in favor of a hike on Wednesday, even though the core reading was no worse than expected. Inside the quarter, core PCE prices rose at a 2.5% annual rate, down from 3.3% in Q2, so the monthly September pickup is the part to watch.
Market reaction: Futures were already lower before the data, with Nasdaq-100 futures down about 1.2% on Alphabet’s results; an in-line core number gave no new direction on its own.
WMR data: Treasury yields, the 2s10s curve and the Fear & Greed reading are tracked on Market Pulse.
Next: the ECB rate decision at 9:15 AM ET, Amazon and Intel earnings after the close, and the October jobs report.
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