Third-quarter growth revised up to 3.6 percent

WASHINGTON Thu Dec 5, 2013 9:53am EST

A tug boat passes in front of a freighter at the Port of Oakland in Oakland, California November 12, 2013. REUTERS/Robert Galbraith

A tug boat passes in front of a freighter at the Port of Oakland in Oakland, California November 12, 2013.

Credit: Reuters/Robert Galbraith

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WASHINGTON (Reuters) - The U.S. economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish.

Gross domestic product grew at a 3.6 percent annual rate instead of the 2.8 percent pace reported earlier, the Commerce Department said on Thursday. Economists polled by Reuters had expected output would be revised up to only a 3.0 percent rate.

The third-quarter pace is the fastest since the first quarter of 2012 and marked an acceleration from the April-June period's 2.5 percent rate.

Businesses accumulated $116.5 billion worth of inventories, the largest increase since the first quarter of 1998. That compared to prior estimates of only $86 billion.

Inventories accounted for a massive 1.68 percentage points of the advance made in the July-September quarter, the largest contribution since the fourth quarter of 2011.

The contribution from inventories had previously been estimated at 0.8 percentage point. Stripping out inventories, the economy grew at a 1.9 percent rate rather than the 2.0 percent pace estimated last month.

A gauge of domestic demand rose at just a 1.8 percent rate.

The strong inventory accumulation in the face of a slowdown in domestic demand means businesses will need to draw down on stocks, which will weigh on GDP growth this quarter.

Fourth quarter growth estimates are already on the low side, with a 16-day shutdown of the government in October expected to shave off as much as half a percentage point from GDP.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down to a 1.4 percent rate, the lowest since the fourth quarter of 2009. Spending had previously been estimated to have increased at 1.5 percent pace.

Consumer spending grew at a 1.8 percent rate in the April-June period.

There were upward revisions to business spending, but estimates for residential construction were lowered. The trade deficit was larger than previously estimated, resulting in trade being neutral to growth in the third quarter.

(Reporting by Lucia Mutikani, editing by Krista Hughes)

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Comments (4)
Bakhtin wrote:
3.6% growth – absolute proof that Obam is destroying the USA! Impeach him!

Now that recession the Republicans caused, with -5% growth and unemployment growing at 800,000 a month… that is real pro-American, patriotic stuff. Not destroying America at all.

Dec 05, 2013 9:00am EST  --  Report as abuse
TheNewWorld wrote:
@Bakhtin

And when the GDP growth drops next quarter as expected and as stated in the article with the direct reasons you will remain quiet right? And the Democrats had as much to do with the recession as the Republicans. The seeds of the crash was planted during the Clinton administration and both sides were complicit. Blaming just the Republicans is pure nonsense, it was due to the Federal government as a whole, but go on, you look cute in your little Demcorat Cheerleader outfit with your pom, poms, carry on.

Dec 05, 2013 9:21am EST  --  Report as abuse
Bakhtin wrote:
I don’t really care if it drops – any growth at all still means Obama is doing way better that Republicans did when they were in power.

Of course you would think the Great Republican Recession was Clinton’s fault and nothing to do with the preceding eight years of Bush. That is your party line. Fox told you to think that.

In the real world outside your partisan bubble, the seeds of the great Republican Recession were Bush’s insistence on pushing housing between 2003 – 2006 which created the housing bubble, and exempting the big five banks from the net capital rule in 2004 – the exact same banks he later bailed out after he trashed the USA.

Dec 05, 2013 11:26am EST  --  Report as abuse
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