The US economy shook off the effects of hurricanes Katrina and Rita to grow at a faster-than-expected 3.8 per cent annual rate in the third quarter, a Commerce Department report showed today.
Strong spending by consumers and by the government helped drive expansion as growth in gross domestic product accelerated from the second quarter's 3.3 per cent rate.
The GDP report, along with a separate one on employment costs from the Labor Department, pointed to underlying economic strength and muted price pressures that analysts said meant the Federal Reserve can stay on a course of small, measured interest-rate rises.
In its first snapshot of third-quarter growth, the Commerce Department said it could not separate the economic effects of the twin hurricanes that struck the US Gulf Coast in late August and September, although it said incomes likely suffered a $40-billion blow from lost wages and rents.
Third-quarter GDP growth would have been more robust if the storms had not placed some drag on incomes. Wall Street economists had forecast GDP would advance at a 3.6 per cent rate in the July-to-September quarter.
The economy has now expanded at rates exceeding 3 per cent for 10 straight quarters
A price gauge favoured by Federal Reserve Chairman Alan Greenspan - personal consumption expenditures excluding food and energy - increased at a 1.3 per cent annual rate compared with 1.7 per cent in the second quarter.
That marks the mildest rate of core price rises since the second quarter of 2003.
Fed policy-makers have pushed US short-term interest rates up 11 times since mid-2004 to keep a rein on prices.