Revised Data Show U.S. Economy Grew at Faster Pace in 3Q

third-quarter growth raised to 4.1 percent
Duane Burleson/AP
By MARTIN CRUTSINGER

WASHINGTON -- The U.S. economy grew at a solid 4.1 percent annual rate from July through September, the fastest pace since late 2011 and significantly higher than previously believed. Much of the upward revision came from stronger consumer spending.

The Commerce Department's final look at growth in the summer was up from a previous estimate of 3.6 percent. Four-fifths of the revision came from stronger consumer spending, primarily in the area of health care.

The 4.1 percent third quarter growth rate came after the economy expanded at a 2.5 percent rate in the second quarter. Much of the acceleration reflected a buildup in business stockpiles.

Economists expect growth has slowed to between 2 percent and 2.5 percent in the current quarter, in part because they believe inventory growth has slowed.

The third quarter rise in the gross domestic product, the economy's total output of goods and services, was the best performance since a 4.9 percent increase in the final three months of 2011.

Still, analysts expect that for the year, the GDP will only expand by around 1.7 percent, down from the 2.8 percent growth of 2012.
Much of that drop-off occurred because consumer spending was depressed by higher taxes that took effect last January and the government's across-the-board spending cuts. The Congressional Budget Office has estimated those two factors shaved 1.5 percentage points from growth in 2013.

But the drag from the government is expected to lessen in 2014. The latest outlook for the National Association for Business Economics predicted growth of 2.5 percent in 2014.

Outside the volatility caused by changes in stockpiles, many analysts say the economy has begun to improve in the current quarter. Steady hiring has lowered the unemployment rate to a five-year low of 7 percent. And much of the November data so far have been upbeat.

Consumer spending at retail businesses rose by the most in five months. Factories increased output for the fourth straight month, led by a surge in auto production. Builders broke ground on homes at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating despite higher mortgage rates. Auto sales haven't been better since the recession ended 4½ years ago. And the stock market is at all-time highs.

Analysts will pay close attention to consumer spending in the fourth quarter. It drives 70 percent of economic growth.

The government significantly boosted consumer spending in Friday's revised data, increasing it to a 2 percent growth rate, up from just 1.4 percent in the previous estimate, which has been the slowest pace since late 2009.

Economists said Friday that the new-found strength in the third quarter was an encouraging development but the period was still dominated by an unsustainable buildup in inventories which will act as a drag on growth in the current quarter.

Pierre Ellis, an economist at Decision Economics, said that the final look at third quarter GDP did offer hope that growth will strengthen in coming months, given the greater strength in consumer spending.

Congress gave final approval Wednesday to legislation that reduces federal spending cuts and averts the risk of another government shutdown early next year. The prospect of less fiscal drag next year has led many economists to predict a better year for the economy in 2014.

A stronger outlook for the economy and job market prompted the Federal Reserve this week to begin winding down its bond-buying program, which was intended to lower long-term interest rates and encourage more borrowing and spending.

The Fed said Wednesday that it would begin reducing its $85 billion-a-month in bond purchases by $10 billion in January. Fed Chairman Ben Bernanke said that if the economy keeps improving, the bond purchases will be trimmed by similar amounts at coming meetings next year.

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ceirriedeadmaneku

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December 22 2013 at 8:05 AM Report abuse rate up rate down Reply
chris1011

The US was in two wars, the stock market had tanked to the 7000s, the US auto industry was all but gone, OBL was still roaming the earth, houses were worth nothing, and the US was losing 900,000 jobs per month when President Obama took office.
By any historical measure, President Obama has been one of the most successful US Presidents ever. It\'s not even close.

December 21 2013 at 5:16 PM Report abuse +1 rate up rate down Reply
chris1011

Republicans only had five short years to learn how to destroy a Presidency. 2013 was their year of triumph! Here’s what they accomplished in that regard:
- With the help of colddeadhands from the NRA, Republicans vigorously opposed against Obama\'s gun initiatives. In fact they eased gun control across America - a disgusting and disgraceful display of a polarized and partisan republican politic in the face of grief caused by gun butcheries.
- Forced enactment of Sequestration.
- Feigned outrage and accused Obama of using the IRS to screen teaparty groups when in fact the IRS acted alone and not only screened progressive groups, but also denied ONLY progressive groups.
- \"Shortly after the October standoff was resolved, with polls showing a majority blamed Republicans, the anti-Obama dam broke.” Five minutes later Republicans came out of their crouched wimper, and went back into relentless anti-Obama attack mode.
- Cut over $4Billion from the Farm bill, but paid themselves and their rich friends tens of millions in completely unnecessary subsidies.
- Refused to extend unemployment benefits to 1.2 million Americans, because they still don’t understand economics, and they really don’t like helping “Obama’s people.”
- Once “mushroom cloud” war hawks, Republicans’ hypocritically hyped the notion that Obama pushed Edward Snowden into stealing secrets from their own NSA built spying program.
- Republican infighting with its own extremist teaparty element caused Immigration reform to falter and fail, but that didn’t stop them from trying to blame it on Obama.

December 21 2013 at 4:52 PM Report abuse +1 rate up rate down Reply
createidea

WASHINGTON -- The U.S. economy grew at a solid 4.1 percent annual rate from July through September, the fastest pace since late 2011 and significantly higher than previously believed.

LOL !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

December 20 2013 at 4:36 PM Report abuse rate up rate down Reply
jerryranger7

Banks are recording record profits.... Lets see let me borrow money at zero interest and then loan it out at anywhere from 12 to 28 percent ...

December 20 2013 at 10:49 AM Report abuse -1 rate up rate down Reply
jerryranger7

Yeah I just run right out and spend more money
On healthcare to spur the economy.

December 20 2013 at 10:47 AM Report abuse -1 rate up rate down Reply
1 reply to jerryranger7's comment
chris1011

Reading comprehension problem?
From the article above: \"Consumer spending at retail businesses rose by the most in five months. Factories increased output for the fourth straight month, led by a surge in auto production. Builders broke ground on homes at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating despite higher mortgage rates. Auto sales haven\'t been better since the recession ended 4½ years ago.\"

December 20 2013 at 11:47 AM Report abuse +1 rate up rate down Reply
jerryranger7

Stronger consumer spending on healthcare?????
Do you really think we are all so stupid??? 2 of the
Largest us employers mcdonalds and wal mart
Are down in sales and not hiring. Really.

December 20 2013 at 10:47 AM Report abuse rate up rate down Reply
mily469

not near me.

December 20 2013 at 10:26 AM Report abuse +1 rate up rate down Reply