Economic Growth Revised Up to 3.1%

The Commerce Department’s third and final estimate Thursday of growth for July through September was increased from its previous estimate of a 2.7 percent annual growth rate.

Growth in the third quarter was more than twice the 1.3 percent growth in the second quarter. But disruptions from Hurricane Sandy and uncertainty weighing on consumers and businesses from the budget negotiations in Washington are likely to restrain growth in the fourth quarter, according to analysts’ forecasts. Many analysts predict an annual growth rate of just 1.5 percent for this quarter.

Robert Kavcic, an economist at BMO Capital Markets in Toronto, said the revision of third-quarter growth did not change his view that the economy is slowing in the current quarter to an annual growth rate below 2 percent. Mr. Kavcic said a temporary increase in military spending and business stockpiling in the third quarter probably is being reversed this quarter.

And many economists are not expecting much improvement in the first quarter of 2013. The latest forecast by 48 economists for the National Association for Business Economics is for an annual growth rate of just 1.8 percent in January through March. Such growth is considered too weak to significantly reduce the unemployment rate, which was 7.7 percent in November.

But if Congress and the White House reach agreement to avoid tax increases and spending cuts, growth could accelerate next year, many economists, including the Federal Reserve chairman, Ben S. Bernanke, have said.

The Fed said last week it would keep an important interest rate at a record low as long as unemployment exceeds 6.5 percent. It forecast that unemployment would stay that high until late 2015.

The government’s final estimate of a 3.1 percent growth rate for third-quarter gross domestic product is a sharp improvement over its initial estimate of 2 percent — a figure that it later increased to 2.7 percent based on a buildup in business stockpiles.

The further increase this month reflected stronger consumer spending, which accounts for about 70 percent of economic activity. The government said consumer spending grew at an annual rate of 1.6 percent in the third quarter. Its previous estimate was 1.4 percent.

The Commerce Department also raised its estimate of spending by state and local governments to show a gain of 0.3 percent — the first quarterly increase in three years. State and local governments had been cutting payrolls and other spending in the aftermath of the recession. Total government spending grew at an annual rate of 3.9 percent in the third quarter, reflecting a surge in military spending.

The economy was also helped by trade in the third quarter. Exports grew at a faster pace than previously estimated.

The National Association for Business Economics forecasting panel has said it expects G.D.P. to grow 2.1 percent in 2013, little changed from the expected 2.2 percent expansion this year.

Article source: http://www.nytimes.com/2012/12/21/business/economy/economy-grew-3-1-in-3rd-quarter-according-to-revision.html?partner=rss&emc=rss