Economists warned that estimates of business inventories, a major factor in the GDP rise, can vary significantly quarter-to-quarter.
Excluding that category, GDP – a broad measure of goods and services made in the US – increased at an annual pace of 2.3%.
The Commerce Department cautioned that its figures did not capture all the losses caused by the storms, which caused widespread closures of factories, offices and airports in states such as Florida and Texas.
Its GDP estimates, for example, do not measure activity in US territories, such as Puerto Rico, which suffered some of the most severe damage.
The Commerce Department estimated that storm-related damage to fixed assets, such as homes and government buildings, totaled more than $131 billion.
It also said it expected the government and insurers to pay more than $100 billion in insurance claims, with foreign companies accounting for more than $17.4 billion.
Commerce Department Secretary Wilbur Ross claimed Friday’s GDP report a sign of progress, calling it a “remarkable achievement in light of the recent hurricanes”.
President Donald Trump has made hitting annual GDP growth of 3% a goal, and pledged tax cuts and other policies intended to reach that pace or higher.
On a year-on-year basis, GDP was up 2.3%, the Commerce Department said in its report, which is an advance estimate that will be revised as more data is collected.
That pace is roughly in line with US expansion since the 2007-2009 recession.
Economists said the underlying economic strength shown in the report makes it more likely that central bankers at the Fed will raise interest rates again by the end of the year, as expected.
The price index for consumer spending, a closely-watched measure of inflation, increased at 1.3% in Q3, excluding food and energy. That remains below the Fed’s 2% target.
The head of the Federal Reserve, Janet Yellen, has warned financial conditions in the US had become “less supportive” of growth.
The Fed released Janet Yellen’s prepared comments ahead of her latest appearance before Congress.
The central bank raised interest rates by 0.25% for the first time in nine years in December 2015.
In the prepared testimony, Janet Yellen said: “Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers and a further appreciation of the dollar.
“Against this backdrop, the [Federal Reserve] Committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labor market indicators will continue to strengthen.”
Janet Yellen added China’s “unclear” currency policy was fuelling global stock market volatility.
She said the decline in China’s currency, the yuan, had “intensified uncertainty about China’s exchange rate policy and the prospects for its economy”.
“This uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth.”
While Janet Yellen said she was confident China’s economy was not facing a “hard landing”, the Fed chief said the overall uncertainty created by the world’s second-largest economy was behind some of the steep falls in global commodity prices, which in turn were creating stress for exporting nations.
Janet Yellen added that “low commodity prices could trigger financial stresses in commodity-exporting economies” as well as in commodity-producing firms around the world.
If such problems materialized, she added, “foreign activity and demand for US exports could weaken and financial market conditions could tighten further”.
Following her prepared testimony Janet Yellen responded to questions in Congress about the new way in which the central bank implemented its last rate rise.
Congress is concerned the new policy benefits the country’s banks more than the American public, because banks receive a higher interest rate on the reserves they hold at the Fed.
Supporters of the interest rate on excess reserves (IOER) policy say it allows the Fed to maintain control of the market.
Janet Yellen has called the policy a “traditional tool” for adjusting rates, citing its use by other central banks around the globe. The Fed was given the power to offer IOER by Congress in 2006.
US stock markets opened higher after the comments.
Recent stock market turmoil has prompted most Wall Street analysts to push back their forecast of when the next US Federal Reserve interest rate rise will occur, from March to June at the earliest.
US stock markets have taken a battering in recent weeks over concerns caused by the economic slowdown in China, which has in turn led to lower commodity and oil prices, while the weaker yuan has made Chinese exports cheaper than those from the US.
The Dow Jones is down some 8.5% since the start of the year, the S&P 500 is down more than 9% since January 1 and the NASDAQ is lower by 14%.
US economic growth in the last three months of 2015 also slowed dramatically, to 0.7% compared with the same period a year earlier, falling from 2% three months earlier.
Global stock markets rallied after the US Federal Reserve’s commitment to keep interest rates low offset its decision to taper its stimulus programme.
Germany’s Dax and France’s CAC were 1.5% in mid-morning trading, while the UK’s FTSE rose 1%. Japan’s Nikkei 225 closed up 1.7%.
The Fed said it would scale back its $85 billion a month bond-buying programme by $10 billion a month.
Analysts said the taper was less than markets had expected.
Investors and economists have been watching closely for when the Fed would scale back its stimulus, fearing that a steep taper could undermine economic recovery.
Global stock markets rallied after the US Federal Reserve’s commitment to keep interest rates low offset its decision to taper its stimulus programme
US markets had ended sharply higher on Wednesday following the Fed’s decision. The Dow Jones jumped 292.71 points, or 1.84%, to close at 16167.97, while both the Nasdaq and S&P 500 indexes rose by more than 1%.
The stimulus programme, called quantitative easing, was introduced by the Fed after the global financial crisis.
The main objective was to increase the money supply and improve liquidity in the financial system in the hope of sparking economic growth and supporting employment.
The Fed’s governing committee cited stronger job growth as a reason for the decision to begin winding down the programme.
It forecast the unemployment rate would fall to 6.3% in 2014 from its current level of 7%.
Analysts said the Fed’s decision to scale back the programme also indicated that it was confident of a sustained recovery in the US economy.
Federal Reserve’s stimulus efforts will be cut in “the coming months”, the central bank’s officials confirmed.
They believe that the US recovery is strengthening, according to minutes from their October meeting.
The Fed is currently engaged in an $8 billion a month bond buying programme to lower interest rates and boost the US economy.
US markets fell on the news of a potential slowing of easy money.
In the meeting minutes, released on Wednesday, policy makers said they “generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months”.
Federal Reserve’s stimulus efforts will be cut in the coming months
However, they also stressed that investors should be assured that short-term interest rates will remain low for an extended period of time – perhaps even after the unemployment rate drops below 6.5% benchmark.
Many meeting participants indicated a desire to better coordinate the Fed’s communication policy regarding the easing back of bond purchases, and of interest rates setting.
Mortgages rates spiked over the summer, after outgoing Chairman Ben Bernanke indicated the central bank was considering a slowing of its easy money policy.
They only declined after the Fed, in a surprise move, decided to maintain the programme – known as quantitative easing – after its September meeting.
The last Federal Open Market Committee meeting under Ben Bernanke’s leadership is scheduled to take place from December 17 – 18.
The minutes also note that Fed policymakers had an unscheduled conference call on October 16 – just before the US was set to breach the so-called debt ceiling and potentially default on its debt obligations.
According to the minutes, policymakers agreed that had Congress been unable to come to an agreement, the situation would have been “potentially catastrophic”.
Minutes of the Federal Reserve’s July meeting revealed few clues about the central bank’s timeline for unwinding its extraordinary efforts to support the US economy.
Officials said they were “broadly comfortable” with plans to scale back the Fed’s $85 billion a month bond-buying programme.
However, the timing remains murky.
Almost all agreed a change in the programme was “not yet appropriate” but “a few” favored swift action.
Fed officials said that recent economic data had been “mixed”, which could indicate that plans to begin the so-called “taper” might be put off if the economy were to weaken.
The central bankers will reconvene on September 17 for a two-day meeting, which will be followed by a press conference by chairman Ben Bernanke.
Minutes of the Federal Reserve’s July meeting revealed few clues about the central bank’s timeline for unwinding its extraordinary efforts to support the US economy
The Dow tumbled by more than 100 points after the minutes were released, although quickly recovered. The S&P 500 and Nasdaq also fell briefly.
After Ben Bernanke hinted at plans to end the bank’s accommodating monetary policy in June, mortgage rates jumped sharply, threatening a fragile housing recovery.
Fed officials acknowledged that market reaction to discussion of an easing of expansionary monetary policy has been volatile.
“Meeting participants pointed to heightened financial market uncertainty about the path of monetary policy and a shift of market expectations toward less policy accommodation,” according to the minutes.
The September Federal Open Market Committee meeting will occur after a spate of economic data has been released, including another jobs report as well as revised second-quarter GDP estimates.
Officials hope this new data will help give them a better sense of when tapering should begin, which many investors believe will happen sometime before the end of this year.
Ben Bernanke has indicated that the timing of the Fed’s decision will be dependent on a healthy US economy.