NEW YORK (CNNMoney.com) -- The U.S. economy shrugged off problems in the housing and credit markets in the third quarter, as the pace of economic growth showed an unexpected gain in the government's latest reading.
The government report Wednesday buttressed arguments on both sides of the question of the day: Should the Federal Reserve cut rates?
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The unexpected strength reduced the need for the Fed to cut interest rates to combat fears of economic weakness. Yet a tame inflation reading in the report could give the central bank a green light to go ahead with a rate cut without worrying about spurring inflation.
Which sides wins the debate will be revealed at 2:15 ET, when the Fed concludes its two-day meeting.
The gross domestic product, the broadest measure of the nation's economic activity, rose at an annual rate of 3.9 percent during the three months ended in September, according to the report.
That's up from the 3.8 percent growth in the second quarter. Economists surveyed by Briefing.com had forecast growth would slow to a 3.1 percent percent growth pace.
It was the strongest pace of economic growth since the first quarter of 2006, when the U.S. economy was catching up from the hit it took in the wake of hurricanes Katrina and Rita the previous quarter.
The report showed that consumption by individuals grew at a 3 percent annual rate, as consumers increased their purchases of most items other than autos.
Exports grew 16 percent, helping to add nearly a percentage point to the overall pace of growth.
The growth in business inventories added nearly 0.4 percentage points to the growth rate, which also was stronger than expected.
The report also showed that prices rose at only a 0.8 percent pace in the quarter, down from a 2.6 percent increase in the second quarter. Economists had forecast that measure, known as the GDP price deflator, would slow to a 2 percent rise in the latest reading.
2007-10-31
10:41:20
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