WASHINGTON – Gross domestic product increased at a 3.5% annual rate from July through September as consumer spending drove economic growth to its highest rate in more than two years, the Commerce Department reported today.
Consumer spending, which accounts for about 70% of GDP, increased 3.4% at an annual pace, the largest increase since the first quarter of 2007. Consumption of durable goods jumped at a 22.3% annual rate, the largest increase since the fourth quarter of 2001, aided in part by the “cash for clunkers” program, the report showed. Motor vehicle output added 1.66 percentage points to the GDP.
Core personal consumption expenditures, which exclude food and energy prices and is the Federal Reserve’s preferred measure of inflation, increased 1.4% in the third quarter, after a 2.0% gain in the second quarter.
Economists polled by Thomson Reuters expected GDP to increase 3.2% at an annual rate and for the core PCE index to be 1.4%, according to the median estimate.
GDP fell for four consecutive quarters from July 2008 through August 2009, the longest stretch of quarterly GDP contraction since records began in 1947. In the second quarter, GDP contracted at a 0.7% annual rate.
The report showed a strengthening housing sector. Real residential fixed investment contributed to GDP growth for the first time since the fourth quarter of 2005 and increased 23.4% at an annual rate, the largest increase since the second quarter of 1986, after falling 23.3% in the second quarter. Nonresidential fixed investment decreased at a 2.5% annual rate, the fifth straight decline.
The trade gap between exports and imports widened to $348.3 billion at an annual pace. Net exports of goods and services subtracted from GDP for the first time since the first quarter of 2007. Real exports increased 14.7% at an annual rate and imports increased 16.4%. Both exports and imports fell in the second quarter.
Government consumption and investment increased 2.3% at an annual rate. Federal spending increased 7.9% and state and local spending decreased 1.1%.
Real private inventories added 0.94 percentage point to GDP after subtracting 1.42 percentage points in the second quarter.
