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Third-Quarter U.S. Economic Growth Better Than Expected

U.S. economic activity during this year's July-through-September quarter was a bit stronger than expected, according to data released by the U.S. Commerce Department on October 28. The nation's GDP, the total output of goods and services produced in the U.S., grew at an inflation-adjusted annual rate of 3.8%, two-tenths of a percent higher than the 3.6% rate economists generally expected.

The U.S. economy grew at an annual rate of 3.3% during this year's second quarter and a 3.8% rate during the first quarter.

Nevertheless, "for the economy to continue expanding at 3% or 3.5% a year or better, business investment will have to pick up the slack, and the Fed will have to engineer an interest rate environment that permits a cooling of the housing sector without overly stressing consumers heavily in debt and business plans for expansion," believes Peter Morici, a professor at the University of Maryland's Smith School of Business in College Park and a critic of the Federal Reserve's 16-month-old raising of interest rates. Indeed, Morici claims that if the Fed fails to recognize the U.S. economy is slowing and inflation is moderating it risks "throwing the economy into a tailspin."

Last Friday's report was the first of three the Commerce Department will issue on third-quarter GDP. The next one is due on Nov. 30, and the final report is slated for December 22.

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