Gross domestic product decelerated a bit to a 3.5 percent annual pace in the third quarter, down from a torrid 4.2 percent pace in the prior three months, the Commerce Department said Friday. But expansion in the last two quarters is still the fastest six months of growth in four years.
What caused this? Consumer spending rose 4 percent in the third quarter, even stronger than the prior three months. This was offset somewhat by a slowdown in business and residential investment. Household investment has fallen for three straight quarters.
The value of unsold goods - or business inventories - added 2.1 percentage points to growth, as companies stocked up. A significantly larger trade deficit took 1.8 points off top-line growth. Government spending picked up, expanding 3.3 percent after a 2.5 percent gain in the second quarter.