Third-Quarter G.D.P. Growth Is Revised Up to 2.7%

The economy grew at a substantially faster pace in the third quarter than first thought, powered by increases in business inventories and federal spending.

After initially saying output increased at an annual rate of 2 percent, the Commerce Department on Thursday revised its estimate to show growth at a 2.7 percent rate in the three months that ended Sept. 30.

While businesses have remained cautious amid fiscal uncertainty in Washington and weak growth overseas, consumer spending in the United States has moved along in recent months at a healthier pace.

In addition, a strengthening housing market in many regions, along with better employment figures, has reassured some analysts who feared the economy was close to stalling.

However, worries remain about growth in the current quarter, with many economists estimating output to increase at a more tepid annual rate of roughly 1 percent.

And with more than $600 billion in tax increases and spending cuts looming if Congress and the White House can’t agree on a deal to cut the deficit by Jan. 1, economists warn the economy remains vulnerable.

The newly estimated pace of growth represents a substantial increase in the level of expansion from the second quarter, when the economy grew at a rate of just 1.3 percent. It also marks the fastest rate of expansion since the fourth quarter of 2011, when the economy grew at a 4.1 percent annual pace.

This was the second of the government’s three estimates of quarterly growth. The final figure is scheduled for Dec. 20.

“The economy certainly hasn’t taken off, but it’s nowhere close to a stall,” said David Kelly, chief global strategist for JPMorgan Funds. “The economy is still underperforming its full potential, but once we get past the ‘fiscal cliff’ uncertainty, we could see stronger growth next year.”

He cautioned that the inventory buildup in the third quarter might cool growth in the fourth quarter.   “If you’re building inventory in the third quarter, then you don’t need to build it in the next quarter,” Mr. Kelly said.

In a separate report, the Labor Department said the number of people filing first-time claims for unemployment dropped by 23,000 to a seasonally adjusted level of 393,000 last week. Economists had been expecting the number to total 390,000.

Article source: http://www.nytimes.com/2012/11/30/business/economy/third-quarter-gdp-growth-is-revised-up-to-2-7.html?partner=rss&emc=rss