Excluding food and energy prices, the price index for gross domestic purchases increased 0.4% in the third quarter, compared with an increase of 0.8% in the second.
Recent economic data has been better-than-expected, encouraging hopes for stronger GDP growth in the fourth quarter. Consumer confidence has improved and initial reports point to a strong holiday shopping season.
The $858 billion tax deal, which extends Bush tax cuts across the board for another two years and reauthorizes the extended employment benefits program, is also expected to stimulate consumer spending and business investment.
The deal has prompted several economists to raise their estimates for GDP in 2011. Goldman Sachs has called 2011 the "Year of the U.S.A"Stocks were flat after the report. -- Written by Shanthi Bharatwaj in New York
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