The U.S. economy grew at a 3.1 percent annual rate in the third quarter, more than previously reported, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap.
The revised gross domestic product reading exceeded the highest projection in a Bloomberg survey and compared with a previously estimated 2.7 percent gain, according to Commerce Department figures released Thursday in Washington. The median estimate of economists called for a 2.8 percent advance.
The world’s largest economy will be hard-pressed to maintain that pace of growth this quarter as global demand cools and companies limit spending and hiring ahead of looming tax increases and spending cuts. While a stronger housing market will provide some cushion, the Federal Reserve is pursuing record stimulus aimed at driving bigger gains for the expansion.
“We’re going to have some weakness closing out this year and starting off next year,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Conn. “We really want to see business investment coming back because, ultimately, that’s going to lead to hiring.”
The number of Americans filing first-time claims for unemployment insurance payments rose for the first time in five weeks, a separate Labor Department report showed on Thursday.
Applications for jobless benefits increased by 17,000 to 361,000 in the week ended Dec. 15. Economists forecast 360,000 claims, according to the Bloomberg survey median.
In yet another economic report Thursday, The Conference Board’s measure of the economy designed to signal future activity fell in November, suggesting that growth could remain weak in the early part of next year.
The Board said its index of leading indicators dropped 0.2 percent in November, compared with October, when the index had risen 0.3 percent. It was the first decline in the index since a 0.4 percent fall in August. The index is intended to anticipate economic conditions three to six months out.
On the GDP, projections for economic growth from the 80 economists surveyed ranged from gains of 2.6 percent to 3 percent.
The Thursday report marked the third reading for the quarter. The economy expanded at a 1.3 percent pace in the prior three-month period.
Consumer spending rose at a 1.6 percent annual pace from July through September, compared with the 1.4 percent advance previously reported and a 1.5 percent rise in the prior quarter.
Household purchases contributed 1.12 percentage points to growth in the third quarter. The gain primarily reflected more spending for health care services, the agency said.
The gap between exports and imports narrowed, adding 0.38 point to third-quarter growth. Imports declined at a 0.6 percent rate, the first drop in three years.
Government spending offered more support to growth in the third quarter. State and local government outlays added 0.04 percentage point to GDP, the first contribution since the same three months in 2009.
The Commerce Department previously estimated that such spending subtracted 0.04 percentage point from the economy. The upward revision primarily reflected a pickup in investment on structures.
Business investment in equipment and software, which has slumped as companies waited for lawmakers to clarify tax policy, declined at a 2.6 percent annual pace, the most since the second quarter of 2009. It subtracted 0.19 percentage point from the expansion.
Residential investment, on projects like home construction and improvement, climbed at a 13.5 percent annual rate in the third quarter.
Economists project the economy will slow to a 1.4 percent pace in the current quarter, according to the median of 79 economists surveyed by Bloomberg from Dec. 7-12.
Fed Chairman Ben S. Bernanke said a tightening in fiscal policy is a “major risk factor” that is already harming investment and hiring decisions by causing “uncertainty” or “pessimism.” The central bank “doesn’t have the tools” to offset that event, he said during a Dec. 12 news conference.
A Commerce Department price gauge that is tied to consumer spending and strips out food and energy costs climbed in a recent report at a 1.1 percent annual pace, matching the prior estimate.
Changes in fiscal policy also threaten to reduce household spending, the largest part of the economy, first by hurting Americans’ confidence and then by raising their tax bill. The Thomson Reuters/University of Michigan consumer sentiment index fell in December to a four-month low, a Dec. 7 report showed.
Housing is a bright spot. The number of building permits, a proxy for future construction, issued in November was at a four-year high, according to Commerce Department figures released Wednesday. Record-low mortgage rates and rising home prices suggest the housing recovery will extend into 2013.