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The economy grew 3.5 percent in the third quarter, according to the Commerce Department's initial estimate released Friday. Growth remained strong throughout the quarter as consumer spending rose at the fastest pace (more than 4 percent) in nearly four years, NAFCU Chief Economist and Vice President of Research Curt Long noted in a NAFCU Macro Data Flash report.

Government spending growth also accelerated (+3.3 percent) while businesses stocked up on inventories (+76.3 billion). However, nonresidential investment barely changed (+0.8 percent) following strong growth in the first half of the year. Residential investment dragged growth for the third consecutive quarter (-4 percent) while net exports declined amid international trade tensions ($-939 billion).

"While business confidence remained high, investments on structure and equipment moderated amid growing trade concerns," Long added. "This also suggests that the stimulative effects from the tax cuts are starting to wane."

Contributions to growth of real GDP came from gains in personal consumption expenditures (+2.69 percent), inventory accumulation (+2.07 percent), government spending (+0.56 percent) and nonresidential investment (+0.12 percent). Net exports reduced growth 1.78 percent, followed by residential investment (-0.16 percent).

Personal consumption expenditure (PCE) inflation, the Fed's preferred inflation metric, decreased from 2 percent in the second quarter to 1.6 percent in the third quarter. Meanwhile, core PCE inflation (excluding food and energy) decreased from 2.1 percent to 1.6 percent.

The economy grew 4.2 percent in the second quarter.