WASHINGTON: The U.S. economy grew at a slightly faster rate in the summer than previously reported, mainly because businesses restocked their goods at a stronger pace than first thought.
The overall economy, as measured by the gross domestic product, grew at an annual rate of 2.1 percent in the July-September period, the Commerce Department reported Tuesday. It previously estimated growth of 1.5 percent.
Even with the revision, economic growth slowed sharply from a 3.9 percent gain in the second quarter. The economy then was rebounding from a harsh winter that had sapped first-quarter growth to a barely discernible 0.6 percent pace.
The latest numbers, however, should give the Federal Reserve confidence as it considers an interest rate hike at its next meeting in December. A healthy labor market and falling gas prices are expected to fuel consumer spending, pushing GDP growth in the current quarter to 2.5 percent or better, economists forecast.
A slowdown in stockpiling trimmed growth by 0.6 percentage point in the third quarter. But that was an improvement from the government’s first estimate a month ago that reduced inventory stockpiling had cut growth by 1.4 percentage points. The government will make one final estimate of GDP in the summer next month.
While the revision in inventories helped third-quarter growth, this improvement was offset somewhat by slightly slower growth in consumer spending, which grew at a 3 percent annual rate in the summer. The revision reflected in part weaker spending on cellphones than estimated.
The trade deficit was a bigger drag than initially estimated, trimming growth by 0.2 percentage point, as exports grew by 0.9 percent in the quarter, down from a 1.9 percent initial estimate. American exports have been held back by weakness overseas and a rising value of the dollar.
Business investment slowed to 3.4 percent growth rate in the third quarter, down from 5.2 percent in the second quarter as the category that covers oil and gas exploration plunged at an annual rate of 47.1 percent.
Residential investment grew at a 7.3 percent rate in the third quarter, down slightly from the 9.2 percent second-quarter gain. Government spending grew at a 1.7 percent rate.
While overall GDP growth is expected to accelerate slightly to around 2.5 percent for the year, economists are forecasting that 2015 will be another year of only modest economic growth.