3rd-Quarter U.S. Growth Revised Down to 2 Percent

Gross domestic product grew at a 2 percent annual rate in the third quarter, the Commerce Department said on Tuesday, down from the previously estimated 2.5 percent.

The revision was below economists’ expectations for a rate of 2.5 percent. But data showing consumer spending still firm and business inventories dropping for the first time since the fourth quarter of 2009 appeared to set the stage for a stronger economic performance this quarter.

Data so far suggests the fourth-quarter growth rate could exceed 3 percent, which would be the fastest in 18 months.

Despite the downward revision, the growth last quarter was still a step up from the 1.3 percent rate recorded in the April-June period. Part of the pickup in output during the last quarter reflected a reversal of factors that held back the economy earlier in the year.

A jump in gasoline prices weighed on consumer spending earlier in the year, and supply disruptions from the devastating earthquake and tsunami in March in Japan curbed auto production.

The government revised third-quarter output to account for an $8.5 billion drop in business inventories, which lopped 1.55 percentage points from G.D.P. growth. Inventories were previously estimated to have increased $5.4 billion.

The drag from inventories was offset by strong export growth. Excluding inventories, the economy grew at an unrevised rate of 3.6 percent after expanding 1.6 percent in the second quarter.

Consumer spending was revised down slightly to 2.3 percent from 2.4 percent because of adjustments to motor vehicle fuels and lubricants. It was still the fastest rate since the fourth quarter of 2010.

However, weak income growth could curtail spending. The report showed real disposable income fell 2.1 percent in the third quarter after declining 0.5 percent in the previous three months. There were also small revisions to business investment, which rose at a 14.8 percent rate instead of 16.3 percent as estimates for investment in nonresidential structures and outlays on equipment and software were lowered.

The Commerce Department also said after-tax corporate profits increased at a 3 percent rate after rising 4.3 percent in the second quarter.

Export growth was stronger than previously estimated, rising at a 4.3 percent rate instead of 4 percent. Imports increased at a much slower 0.5 percent rate rather than 1.9 percent.

Trade contributed almost half a percentage point to overall growth. Elsewhere, residential construction grew at a 1.6 percent rate instead of 2.4 percent.

The report showed inflation pressures subsiding. A price index for personal spending rose at a 2.3 percent rate in the third quarter, instead of 2.4 percent.

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