Alison Bloomer(Reuters) The US economy grew faster than initially thought in the third quarter, notching its quickest pace in three years, as increases in business investment in inventories and equipment offset a moderation in consumer spending.
Gross domestic product expanded at a 3.3% annual rate in the third quarter also boosted by a rebound in government spending, the Commerce Department said in its second estimate on Wednesday. That was the fastest pace since the third quarter of 2014 and a pickup from the second quarter’s 3.1% rate.
The economy was previously reported to have grown at a 3.0% pace in the July-September period. It was the first time since 2014 that the economy experienced growth of 3% or more for two straight quarters.
Growth pace
The growth pace, however, likely exaggerates the health of the economy as inventories, goods yet to be sold, contributed 0.8 percentage point to third-quarter GDP growth - up from the previously reported 0.73 percentage point.
Excluding inventory investment, the economy grew at a 2.5% rate. When measured from the income side, output also expanded at a 2.5% rate. The government said after-tax corporate profits surged at a 5.8% rate last quarter after rising at only a 0.1% pace in the second quarter.
Economists polled by Reuters had expected that third-quarter GDP growth would be raised to a 3.2% rate.
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Economic recovery
The economic recovery since the 2007-2009 recession is now in its eighth year and showing little signs of fatigue. The economy is being powered by a tightening labour market, which has largely maintained a strong performance that started during former President Barack Obama’s first term.
Economists see a modest boost to growth from efforts by President Donald Trump and his fellow Republicans in Congress to push through a broad package of tax cuts, including slashing the corporate income tax rate to 20% from 35%.
Trump wants lower taxes to lift annual GDP growth to 3% on a sustained basis. The fiscal stimulus would, however, come when the economy is at full employment.
