GDP muscles through

Despite a rough year, the economy is showing surprising resilence.

Economy brushes off storms and expands by 3.8 percent in 3Q, beating estimates.

WASHINGTON (Reuters) - The U.S. economy shook off headwinds from hurricanes Katrina and Rita to grow at a faster-than-expected 3.8 percent annual rate in the third quarter, a Commerce Department report showed Friday.

Strong spending by consumers and by the government helped power the expansion forward as growth in gross domestic product -- the measure of all goods and services produced within U.S. borders -- accelerated from the second quarter's 3.3 percent rate.

Wall Street economists had forecast GDP would advance at a 3.6 percent rate in the July-to-September quarter. The economy has now expanded at rates exceeding 3 percent for 10 straight quarters.

Despite surging prices at the gasoline pumps, the report showed that so-called core inflation, which exempts food and energy from its calculation, declined in the third quarter. A price gauge favored by Federal Reserve Chairman Alan Greenspan -- personal consumption expenditures excluding food and energy -- increased at a 1.3 percent annual rate compared with 1.7 percent in the second quarter. That marks the mildest rate of core price rises since the second quarter of 2003.