This will go down as lagging figures for Sept. come int. But another solid quarter.

http://www.marketwatch.com/news/story.asp?...d=myyahoo&dist=

U.S. GDP grows 3.8% in Q3
Government gives no estimate of impact of hurricanes
By Greg Robb, MarketWatch
Last Update: 8:34 AM ET Oct. 28, 2005

WASHINGTON (MarketWatch) - Growth in the U.S. economy picked up in the third quarter to a 3.8% annualized rate, the Commerce Department said Friday.

Spending by consumers and the federal government contributed most of the increase in gross domestic product. Foreign trade was a slight drag on growth.

The economy grew 3.6% in the past year. GDP increased at a 3.3% rate in the second quarter.

The government did not break out an estimate for the impact on growth from Hurricanes Katrina and Rita. Most of the impact of the hurricanes will come in September data, most of which is not yet available.

Economists surveyed by MarketWatch were expecting GDP to increase 3.6% in the third quarter. See Economic Calendar.

Inflation cooled down. Core consumer prices increased at a 1.3% rate in the quarter, the slowest quarterly increase since the second quarter of 2003.

The core PCE price index has increased 1.9% over the past year, down from 2.0% growth in the second quarter and the slowest annual increase since the first quarter of 2004.

Despite the moderation, the rate of inflation remains near the top of the Federal Reserve's comfort zone.

The Federal Open Market Committee will meet again on Tuesday and is expected to raise interest rates again to 4.0%.

The Fed has boosted short-term interest rates eleven times to keep inflation pressures under control

In the third quarter, consumer spending increased at a 3.9% rate, compared with a 3.4% rate in the second quarter. Consumer spending contributed 2.73 percentage points to growth. Spending on autos contributed the most to growth since the third quarter of 2003.

Business investment increased at a 5.7% rate, down from 9.5% in the second quarter. Investments in equipment and software increased at a 8.9% rate, down from 10.9% in the second quarter. Business investment added 0.65 percentage points to growth.

Inventories were a slight drag on reported GDP, subtracting 0.55 percentage points from growth after subtracting more than 2 percentage points from growth in the second quarter.

Final sales of domestic product - GDP less change in private inventories - increased 4.4% in the third quarter, compared with an increase of 5.6% in the second quarter.

Investment in housing increased at a 4.8% rate, down from 10.8%. Housing contributed 0.28 percentage points to growth.

Government spending increased 3.2% Federal spending increased 7.7% State and local government increased at a 0.7% rate.

The improvement in the trade balance contributed a slight .08 percentage point to growth in the third quarter after boosting growth by more than 1.0 percentage points in the second quarter.

Exports increased 0.8%, while imports were flat.

The first estimate of GDP is based on estimates of several key components, rather than on hard data. The September data on trade, inventories and construction spending are not yet available. The government will issue its second estimate on Nov. 30.

The government is assuming a drop in aircraft shipments as a result of the strike at Boeing Co, and a worsening trade deficit in September.

In a separate report, the Labor Department said employment costs rose in line with expectations.