The national economy slowed significantly from the second quarter in the first initial GDP estimate for the third quarter, with gains driven by military spending offsetting a slowdown in consumer spending and inventory investment.
The advance estimate for the third quarter posted at a moderate 3.5% annualized, following 4.6% printing in the second quarter.
Final sales of domestic product increased a healthy 4.2% after gaining 3.2% in the second quarter. Final sales to domestic purchasers rose 2.7% in the third quarter, compared to 3.4% in the second quarter.
The increase in real GDP in the third quarter primarily reflected a big boost in government spending, especially Defense spending, with a surge of 0.83% making up for the downturn in consumer spending from the second quarter.
Other positive drivers were gains in exports, nonresidential fixed investment, and state and local government spending that were partly offset by a negative contribution from private inventory investment.
Imports, which are a subtraction in the calculation of GDP, decreased.
The notable negative for the third quarter was a drop in inventory investment and a slowdown in consumer spending growth. Both were strong in the second quarter. The deceleration reflected a downturn in private inventory investment and decelerations in PCE, in nonresidential fixed investment, in exports, in state and local government spending, and in residential fixed investment.