U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December.
Gross domestic product increased at a 1.5% annual rate after expanding at a 3.9% clip in the second quarter, the Commerce Department said on Thursday.
The inventory drag, however, is likely to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals.
The Fed on Wednesday described the economy as expanding at a "moderate" pace and put a December rate hike on the table with a direct reference to its next policy meeting. The U.S. central bank has kept benchmark overnight interest rates near zero since December 2008.
The economy stateside has struggled to sustain a faster pace of growth since the end of the 2007-2009 recession, with average yearly growth failing to break above 2.5%.
Economists had forecast GDP expanding at a 1.6% rate in the third quarter.
