* Third-quarter growth raised to 3.1 percent pace
* Exports, government spending account for most of revision
* Imports post first decline since second quarter of 2009
* Jobless claims up 17,000, at lower end of pre-storm range
* Home resales highest in three years
By Lucia Mutikani
WASHINGTON, Dec 20 The U.S. economy grew faster
than previously thought in the third quarter, helped by exports
and government spending, but a sluggish global demand and
belt-tightening by Washington looks set to put on the brakes
Other data on Thursday showed factory activity in the
mid-Atlantic region picked up this month, while home resales in
November were the best in three years, indicating the economy
retained some vigor early in the fourth quarter.
However, a rise in first-time applications for unemployment
aid last week suggested job growth remains modest.
Gross domestic product expanded at a 3.1 percent annual rate
in the third quarter, the Commerce Department said. It was the
fastest pace since late 2011 and more than double the second
quarter's 1.3 percent rate.
A month ago, the department said GDP grew at 2.7 percent
pace during the July-September period.
Millan Mulraine, a senior economist at TD Securities in New
York, said the factors that boosted growth in the third quarter
probably did not carry through the final three months of 2012.
"I don't think it changes the narrative that this quarter
will be very weak. The fact that we had an upward revision means
that it's a higher hurdle in the fourth quarter to get above the
current best case of 1 percent (growth)," Mulraine said.
Economists say businesses have hunkered down in the current
quarter out of worry that currently stalled budget talks in
Washington will fail to steer clear of a $600 billion "fiscal
cliff" that could tip the economy back into recession.
Even if a deal is reached to avoid the brunt of the blow, a
tighter fiscal policy and cooling global economy are still
likely to weigh on U.S. growth in coming quarters.
A Reuters poll of economists earlier this month showed a
median forecast for GDP growth in the fourth quarter of just a
1.2 percent annual pace. Economists expect GDP to expand just
1.9 percent next year.
In a second report, the National Association of Realtors
said sales of previously owned homes surged 5.9 percent in
November to a seasonally adjusted annual rate of 5.04 million
units. It was the fastest sales pace since November 2009 and
confirmed a housing recovery was strengthening.
KB Home, the nation's fifth-largest homebuilder, reported a
20 percent rise in quarterly revenue in the latest quarter as
selling prices rose, although higher costs still squeezed its
Separately, a factory gauge from the Philadelphia Federal
Reserve Bank showed activity in the mid-Atlantic region turned
up this month after slipping in November, a finding that should
ease fears of a hard landing for U.S. manufacturing.
"The sky is not falling on manufacturing," said Robert Dye,
chief economist at Comerica in Dallas. "The contribution from
housing-related manufacturing is making a difference."
MODEST JOB GROWTH
In a fourth report, the Labor Department said initial claims
for jobless benefits increased 17,000 to a seasonally adjusted
361,000 last week, in the low end of the range they held before
Superstorm Sandy struck in late October.
The data covered the survey period for the government's
report on December nonfarm payrolls and suggested another month
of modest employment growth. Job gains so far this year have
averaged 151,000 per month, not enough to significantly lower
U.S. stocks ended higher amid optimism over the budget talks
in Washington. Prices for U.S. Treasury debt were flat, while
the dollar was little changed against a basket of currencies.
In the third quarter, the economy was also buoyed by a big
inventory build up, which added 0.73 percentage point to GDP
growth. Economists expect inventories to weigh in the fourth
"It could be that businesses will want to continue to
accumulate inventories but that seems unlikely," said David
Berson, chief economist at Nationwide Insurance in Columbus,
Ohio. "It's the same with federal government spending, it's very
unlikely to continue."
While growth in consumer spending, which accounts for about
70 percent of U.S. economic activity, was raised by 0.2
percentage point to a 1.6 percent rate, it was little changed
from the second quarter's pace.
Exports grew at a healthy 1.9 percent rate, rather than the
1.1 percent reported a month ago, while imports fell for the
first time in more than three years in a sign of sluggish
Government spending was revised to a 3.9 percent growth rate
from 3.5 percent, with spending by state and local government
growing for the first time in three years.
Taking out the boost from inventories and government, demand
in the economy remained weak, rising at just a 1.5 percent rate
- the slowest since the end of 2009 - and a step down from the
1.9 percent pace logged in the second quarter.
"It suggests that growth this quarter could be somewhere
between 1.2 and 1.5 percent, if we don't have outsized
contributions from government and inventories. That's very
suboptimal growth," said Berson.