"Growth downshifted a bit in Q3 and we look for some further slowing in the quarters ahead".
Fed officials have recently talked about "optimism and acceleration in capital spending and could it lift the supply side", but the slowing in business investment "is inconsistent with a sizable improvement in spending", said Michael Gapen, chief USA economist at Barclays Plc and a former official at the central bank.
On Wall Street, stocks were expected to open sharply lower amid fears about top technology stocks such as Amazon and Google-parent Alphabet, which reported disappointing results before trading began.
Economists had forecasted an expansion of the GDP of 3.3% during the third quarter.
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"The risk to the expansion from elevated inflation moved up early in the year, but has eased over the last six months and remains modest compared to risks in the 2000s or in 2011", the authors wrote. That hasn't happened since 2005.
Trade, which had boosted second quarter growth by 1.2 percentage points, shaved 1.8 percentage points off growth in the third quarter.
The rise in consumer spending, which accounts for about 70 percent of the economy, unexpectedly accelerated to an nearly four-year high of 4 percent. Nonresidential fixed investment, which broadly captures business spending, grew at a pace of just 0.8% during the third quarter, the slowest since the fourth quarter of 2016.
In Riccadonna's view, unless there are more tax or another change in fiscal policy, growth in the second and third quarter's appears to be boosted by a "sugar high" from tax cuts rather than creating a new path for economic growth. The core PCE price index rose at a 1.6% annual rate, down from a 2.1% rate in the second quarter.
A core measure that economists monitor for a better sense of underlying demand - final sales to domestic purchasers - increased at a 3.1 percent pace, slowing from 4 percent.
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While that was a slowdown from a 4.2% pace in the second quarter, it still exceeded the economy's growth potential, which economists put at 2%.
During the past four quarters, the GDP has risen 3 cent, well above the 2.3 per cent growth during the year-earlier period.
Ther GDP report also showed major distortions because of President Donald Trump's tariffs on Chinese goods and metals.
Former White House economist Jared Bernstein said the strong showing reflects the fact that so many people are in the job market.
However, the drag from trade was probably offset by faster inventory accumulation by businesses stockpiling before USA import duties, on mostly in Chinese goods, came into effect.
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The Fed also expects the unemployment rate next year to dip to 3.5 percent - that would be the lowest jobless rate since 1969. He can't remove Fed governors, including Powell, except for ill-defined "cause", and the Senate must confirm replacements.
"Today's 3.5 percent GDP print slightly beat estimates and, similarly to the 4.2 percent Q2 print, this is because still-easy monetary conditions were mixed with a heavy dose of fiscal stimulus", said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. Higher interest rates are pressuring the housing market, businesses are struggling to find workers and the import tariffs are increasing manufacturing costs for companies, such as Caterpillar Inc, 3M Co and Ford Motor Co. Those exports dropped in the third quarter and could continue to drop if the tariffs remain in place.