Despite still-healthy spending by consumers, the U.S. economy slowed significantly last quarter, the government said Thursday.
At an annualized rate of 1.5 percent, the tempo of growth in July, August and September represents a marked drop from the 3.9 percent pace of expansion in the spring.
Wall Street had expected the Commerce Department data to show a slowdown in the third quarter, with economists looking for a growth rate of 1.6 percent before the report.
Much of the downshift was because of slower inventory accumulation, as businesses let stockpiles of goods in warehouses and on store shelves unwind a bit rather than making big additions as they had done in the first half of 2015.
Although the lackluster headline number will not stir much excitement, major components of the economy like consumer demand have held up well in recent months. Consumption rose 3.2 percent last quarter.
Residential investment also remained healthy last quarter, a sign that the housing market continued to provide the overall economy with a much-needed tailwind.
"Personal consumption is the 800-pound gorilla of the economy," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. "It's quite good, especially given that the recovery is a bit long in the tooth."
Indeed, the pluses and minuses buried in the details of Thursday's report highlight the contradictions that economists, Federal Reserve policymakers and ordinary consumers all have to contend with after more than six years of tepid economic growth.
Some sectors — technology, health care, finance — are enjoying conditions that echo the booming 1990s or the housing bubble a decade ago.
Things could not be more different in areas of the economy that depend on commodity prices, like the oil and gas industry, which is cutting jobs amid a downturn in energy prices. Manufacturers, too, have felt headwinds as the strong dollar and weakness in China have hurt sales overseas.
Echoing this pattern, economic conditions are best on the coasts, especially the Northeast as well as Silicon Valley, while broad swaths of the country's midsection struggle.
"We've got a lot of folks moving into the Bay Area getting jobs, and you see the growing pains that come with that, like traffic and housing affordability," said Scott Anderson, chief economist at Bank of the West in San Francisco. "The incubator is the tech sector, but it's broader-based than that."
At the same time, he said, "the decline in energy and commodities is having a detrimental effect on growth from Texas north to Minnesota."
Thursday's report is the first of three estimates the government will make and the numbers could be revised upward or downward as more data comes in.
While investors have generally been pleased with the moderate pace of growth in recent years, even as many workers complain about stagnant wages, Fed officials are still trying to determine when economic conditions will finally justify a long-anticipated increase in interest rates.
On Wednesday, as expected, the Fed kept short-term rates at near zero, where they have been since late 2008. But officials signaled an increase could finally come when they meet in late December, especially if economic growth and employment pick up in the fourth quarter.
For the current quarter, experts are expecting the economy to grow at an annual rate of about 2.5 percent. One clue about whether they are right will come on Nov. 6, when the Labor Department reports on hiring and unemployment in October.
"For the Fed to raise rates in December, the next two labor market reports need to be clearly strong," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients Wednesday. "That ought to be enough to trigger action."