WASHINGTON (Oct. 30, 2014) — The Gross Domestic Product (GDP) grew at a rate of 3.5 percent in the third quarter of 2014, according to the latest figures from the Commerce Department's Bureau of Economic Analysis (BEA).
The 3.5-percent rate was down from the 4.6 percent recorded in 2014's second quarter, the BEA said.
Although there were downturns in many important areas in the third quarter—including private inventory investment, personal consumption, exports, residential fixed investment and state and local government spending—there actually was solid growth in most of those areas, the agency said.
The comparison between the second- and third-quarter GDPs was skewed because of the massive increases in the second quarter compared with the first quarter, the BEA said. The first quarter saw a 2.1-percent drop in the GDP caused largely by bad weather, it said.
Imports decreased during the third quarter, while federal government spending jumped 10 percent, powered by a 16-percent increase in national defense spending, the agency said.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, grew 1.3 percent in the third quarter, compared with 2 percent in the second, according to the agency.
The BEA released its GDP figures Oct. 30, the day after the Federal Reserve's Federal Open Market Committee (FOMC) announced it is ending its program of buying trillions of dollars of government bonds to stimulate the economy — known as quantitative easing.
In its Oct. 29 statement, the FOMC said the labor market has improved substantially since the most recent round of asset purchases began. Therefore, it said, all assets purchases will end immediately.
“The committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities at auction,” the FOMC said. “This policy, by keeping the committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.”
On the other hand, the committee said it would maintain the federal funds rate — the interest rate at which banks lend to other banks — at 0 to ¼ percent.
“In determining how long to maintain this target range, the committee will assess progress — both realized and expected — toward its objectives of maximum employment and 2-percent inflation,” it said.