The US economy expanded at a 3.7 percent annual rate in the third quarter, below expectations but still bolstered by healthy consumer spending that was accompanied by the lowest inflation in decades, the Commerce Department said on Friday.
Though the third-quarter expansion in gross domestic product - the measure of total output within the nation's borders - came in below Wall Street economists' forecasts for a 4.2 percent pace of growth, it still was up from 3.3 percent in the second quarter.
It was one of the final pieces of economic data before Tuesday's US presidential election in which the economy's condition has been a focal point, and indicated generally that a solid expansion remains in place.
"I think it shows, as the Fed (Federal Reserve) indicated, that the economy regained some traction in the third quarter, but the growth is not robust," economist Gary Thayer of A.G. Edwards and Sons Inc in St. Louis said. "I think it means the Fed can take its time raising rates."
Central bank policymakers meet on November 10 to consider interest-rate strategy and are widely expected to nudge rates up another quarter percentage point - a fourth such move this year - but likely to keep rates steady at their final meeting of the year in December.
Some analysts noted that America's swelling trade deficit seemed to be putting a damper on the rate of expansion but not putting a lid on it entirely.
"It's a pretty good growth rate, but it may not be enough to create jobs," said economist Robert Brusca of Fact and Opinion Economics in New York.
The dollar's value weakened against other major currencies after the GDP report was published. Bond prices weakened initially but later regained some of the losses, apparently heartened by the indications of very low inflation that is helpful for bond investors because it means price rises are not as likely to sap yields.
Consumer spending, which accounts for about two-thirds of economic activity, increased at the fastest rate in a year while a price gauge that is favoured by Federal Reserve Chairman Alan Greenspan - the index of personal consumption expenditures minus food and energy - barely increased at a 0.7 percent rate.
That was the smallest gain in this price measure in nearly 42 years, since a 0.5 percent rise in the fourth quarter of 1962, department officials said.
The department said that consumer spending increased at a solid 4.6 percent annual rate in the third quarter, well ahead of the 1.6 percent rate posted in the second quarter. Businesses also kept investing strongly, with so-called non-residential spending growing at an 11.7 percent rate after a 12.5 percent pace of growth during the second quarter.
The snapshot of ongoing expansion presented by the GDP figures, backed by brisk consumer and business spending, likely will be seized upon by the Bush administration as evidence that its policies were producing solid growth.
Democratic contender Senator John Kerry has criticised lagging job creation and record budget deficits since President George W. Bush took office in January 2001.
There was some falloff in inventory-building during the third quarter, which subtracts from growth. Businesses built up their stocks of unsold goods at a $48.1-billion annual rate after adding to them at a $61.1-billion rate in the second quarter, possibly a reflection of accelerated spending by consumers that was especially evident for costly durable goods like new cars.
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