Real gross domestic product (GDP) increased at an annual rate of 3.5% in the third quarter of 2018, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.2%.

The "second" estimate for the third quarter, based on more complete data, will be released on November 28, 2018.

“GDP growth for the third quarter met our forecast. This strong, above trend growth is being driven by stronger consumer spending – fueled by the incredibly healthy job market and rising wages," said Mortgage Bankers Association Chief Economist Mike Fratantoni. "Stimulative fiscal policy is also clearly spurring faster expasnion, with the third quarter data showing gains in defense spending. We expect the pace of economic expansion to step down a notch in 2019, but it will still be above the long-run trend. This in turn should push down the unemployment rate even lower – keeping housing demand up even in the face of somewhat higher mortgage rates.”

The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, state and local government spending, federal government spending, and nonresidential fixed investment that were partly offset by negative contributions from exports and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP growth in the third quarter reflected a downturn in exports and a deceleration in non-residential fixed investment. Imports increased in the third quarter after decreasing in the second. These movements were partly offset by an upturn in private inventory investment.

The price index for gross domestic purchases increased 1.7% in the third quarter, compared with an increase of 2.4% in the second quarter (table 4). The PCE price index increased 1.6%, compared with an increase of 2.0%. Excluding food and energy prices, the PCE price index increased 1.6%, compared with an increase of 2.1%.

Current-dollar personal income increased $180.4 billion in the third quarter, compared with an increase of $180.7 billion in the second quarter. Accelerations in rental income, wages and salaries, and nonfarm proprietors’ income were offset by a downturn in farm proprietors’ income and a slowdown in dividend income.

Disposable personal income increased $155.0 billion, or 4.1%, in the third quarter, compared with an increase of $168.9 billion, or 4.5%, in the second quarter. Real disposable personal income increased 2.5%, the same increase as in the second quarter.

Personal saving was $999.6 billion in the third quarter, compared with $1,054.3 billion in the second quarter. The personal saving rate -- personal saving as a%age of disposable personal income -- was 6.4% in the third quarter, compared with 6.8% in the second quarter.