WASHINGTON Nov 29 The U.S. economy grew faster
than initially thought in the third quarter, notching its best
performance in two years, buoyed by strong consumer spending and
a surge in soybean exports.
Gross domestic product increased at a 3.2 percent annual
rate instead of the previously reported 2.9 percent pace, the
Commerce Department said in its second GDP estimate on Tuesday.
Growth was the strongest since the third quarter of 2014 and
followed the second quarter's anemic 1.4 percent pace.
Growth was also lifted by upward revisions to business
investment in structures and home building, underscoring the
economy's solid fundamentals that further bolster the case for
the Federal Reserve to raise interest rates next month.
Data ranging from housing to retail sales and manufacturing
suggest the economy retained its momentum early in the fourth
quarter even as exports appear to be faltering against the
backdrop of renewed dollar strength and a fading soybean boost.
Economists polled by Reuters had expected that third-quarter
GDP growth would be revised up to a 3.0 percent rate.
When measured from the income side, the economy grew at a
5.2 percent clip amid a rebound in corporate profits and rising
household incomes. That was the fastest pace of increase in
gross domestic income since the second quarter of 2014 and
followed a 0.7 percent rate of increase in the second quarter.
The average of GDP and GDI, which some economists consider
to be a more accurate measure of current economic growth and a
better predictor of future output, increased at a 4.2 percent
rate in the third quarter, the fastest pace in two years. That
followed a 1.1 percent rate of increase in the second quarter.
FAVORABLE GROWTH PROFILE
The third-quarter revision also showed a much more favorable
growth profile for the economy. The boost from inventories was
not as big as previously estimated, which suggests that
businesses are not sitting on piles of unwanted goods.
This means they will have more scope to place new orders,
which augurs well for economic growth in the coming quarters.
The sharp acceleration in GDP in the last quarter should quash
any lingering fears that the economy was at risk of stalling
after growth averaged just 1.1 percent in the first half.
That together with a labor market that is near full
employment and steadily rising inflation could leave the Fed
comfortable to hike interest rates at its Dec. 13-14 policy
meeting. The U.S. central bank raised its overnight benchmark
interest rate in December for the first time in nearly a decade.
The Commerce Department said consumer spending, which
accounts for more than two-thirds of U.S. economic activity,
increased at a 2.8 percent rate in the third quarter and not the
2.1 percent pace reported last month. That was still a slowdown
from the second quarter's robust 4.3 percent pace.
Spending on nonresidential structures, which include oil and
gas wells, increased at a 10.1 percent rate, the fastest pace
since the first quarter of 2014. Nonresidential outlays were
previously reported to have increased at a 5.4 percent pace.
Business spending on equipment, however, fell at steeper 4.8
percent rate, instead of the previously reported 2.7 percent
pace of contraction. That marked four straight quarters of
decline in spending on equipment.
With after tax corporate profits rising at a 7.6 percent
pace last quarter there is scope for business investment to
rebound. Corporate profits declined at a 1.9 percent rate in the
The export growth estimate was little changed at a 10.1
percent rate, the fastest pace since the fourth quarter of 2013.
The spike in exports largely reflected a surge in soybean
exports after a poor soy harvest in Argentina and Brazil.
Still, trade contributed 0.87 percentage point to GDP growth
and not 0.83 percentage point as reported last month.
Businesses increased spending to restock after running down
inventories in the second quarter, but just not as much as
previously reported. Businesses accumulated inventories at a
$7.6 billion rate in the last quarter, almost half of the $12.6
billion pace reported last month.
That means inventory accumulation contributed 0.49
percentage point to GDP growth and not the 0.61 percentage point
reported last month.
Investment in residential construction fell at a 4.4 percent
rate instead of the previously reported 6.2 percent pace.
Government spending was revised lower.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)