The economy grew at a 1.5 percent annual rate in the third quarter, a sharp slowing from the 3.9 percent rate reported for the second quarter. The falloff was largely due to slower inventory growth. Inventories subtracted 1.44 percentage points from the growth rate in the quarter after adding 0.02 percentage points in the second quarter. Final demand for the quarter grew a 3.0 percent annual rate. For the first three quarters of the year GDP has risen at a 2.0 percent annual rate.

There were few surprises in the report. Consumption grew at a 3.2 percent rate, driven by a 6.5 percent growth rate in durable good consumption. Non-residential investment grew at a weak 2.1 percent rate. All components of investment were weak, but structures declined at a 4.0 percent rate after rising 6.2 percent in the second quarter. Housing grew at a modest 6.1 percent rate, down from an average of 9.8 percent in the prior three quarters. Exports and imports grew at almost the same rate, having little net effect on growth. Government expenditures grew at a 1.7 percent annual rate, adding 0.3 percentage points to growth.

There continues to be no evidence of inflationary pressures in any sector. The core PCE grew at just a 1.2 percent rate in the quarter. The basic story continues to be one of modest growth with very little inflation.