By Martin Crutsinger
WASHINGTON: The U.S. economy grew at a solid 4.1 percent annual rate from July through September, the fastest pace since late 2011 and significantly higher than previously believed. Much of the upward revision came from stronger consumer spending.
The Commerce Department’s final look at growth in the summer was up from a previous estimate of 3.6 percent. Four-fifths of the revision came from stronger consumer spending, primarily in the area of health care.
The 4.1 percent third-quarter growth rate came after the economy expanded at a 2.5 percent rate in the second quarter. Much of the acceleration reflected a buildup in business stockpiles.
Economists expect growth has slowed to between 2 percent and 2.5 percent in the current quarter, in part because they believe inventory growth has slowed.
The third-quarter rise in the gross domestic product, the economy’s total output of goods and services, was the best performance since a 4.9 percent increase in the final three months of 2011.
Still, analysts expect that for the year, the GDP will only expand by around 1.7 percent, down from the 2.8 percent growth of 2012. Much of that drop-off occurred because consumer spending was depressed by higher taxes that took effect last January and the government’s across-the-board spending cuts. The Congressional Budget Office has estimated those two factors shaved 1.5 percentage points from growth in 2013.
But the drag from the government is expected to lessen in 2014. The latest outlook for the National Association for Business Economics predicted growth of 2.5 percent in 2014.
Consumer spending at retail businesses rose by the most in five months. Factories increased output for the fourth straight month, led by a surge in auto production. Builders broke ground on homes at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating. Auto sales haven’t been better since the recession ended 4½ years ago. And the stock market is at all-time highs.