US economy keeps growing strong at 3.5% in the third quarter

That's still strong, though lower than the 4.2% clip the economy grew during the second quarter. It was the sixth consecutive quarter with growth above 2%.

The slowdown from last quarter was due to a deceleration in business investment, which boomed in the first half of the year in part because of the dramatic tax cut enacted at the end of 2017.

Net exports also declined from a surge last quarter as manufacturers and farmers rushed to sell their goods overseas in advance of expected retaliatory tariffs from China. In recent months, retailers boosted their imports, leading to a buildup in inventories.

The growth figure was in line with economists' forecasts, which had come down in recent days after the release of lackluster home sales data.

Real disposable personal income grew at an annual rate of 2.5%, the same as last quarter. That's slightly above the 2.35% average growth since the end of the last recession in late 2009. But it's considerably less than the 4.0% increase in consumer spending.

"Four percent growth is a phenomenal performance," said Scott Anderson, chief economist at the Bank of the West. "We don't think that's sustainable. We think spending is getting a little ahead of incomes. Some of those interest-rate sensitive spending categories are going to feel more pressure as interest rates continue to rise."

The personal consumption expenditures price index, a measure that the Federal Reserve watches carefully when deciding whether to raise interest rates, rose only 1.6% in the third quarter. That's down from 2.0% from last quarter, and considerably short of the Fed's inflation target.

Minutes from the Federal Reserve's September meeting indicated policymakers intend to continue gradually raising rates.

The GDP number is preliminary and may be revised in the coming months.