(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.
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.
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.