US inflation stays firm as GDP beats expectations in Q3

(Sharecast News) - US inflation accelerated in September, keeping price growth well above the Federal Reserve's 2% target, according to the Commerce Department, while the economy expanded faster than expected in the third quarter. The personal consumption expenditures price index rose 0.5% on the month, matching consensus forecasts, while the annual rate of 3.6% was just below expectations.

Core PCE, the Fed's preferred gauge of underlying trends, increased 0.3% on the month and 3.1% year‑on‑year, both in line with estimates. On a quarterly basis, headline PCE eased to 2.1%, with core at 2.5%, down from 5% and 3.3%, respectively, in Q2.

Despite inflation remaining elevated, the economy showed surprising strength, with gross domestic produc growing at a 3.4% annualised clip in the third quarter, ahead of the 3.1% forecast and up from 2.2% in Q2. Growth was driven by a 12.7% surge in business investment linked to the artificial intelligence build‑out, while consumer spending rose 3.8%, matching the prior quarter and marking the strongest pace since late 2024.

Gross private domestic investment jumped 19.4%, supported by a 20.9% rise in equipment spending and an 8.4% increase in intellectual‑property investment.

Real sales to private domestic purchasers - a key measure of underlying demand watched closely by Fed officials - climbed 4.9%, up from 4.6% in Q2.

Monthly consumer spending rose 0.5%, slightly below expectations, while personal income increased 0.2%.





Reporting by Iain Gilbert at Sharecast.com