US economy sees faster-than-expected growth

Thursday 05 December 2013 18.48
US growth in the third quarter was the fastest since the first three months of 2012
US growth in the third quarter was the fastest since the first three months of 2012

The US economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish.

Gross domestic product grew at a 3.6% annual rate instead of the 2.8% pace reported earlier, the US Commerce Department has said. 

Economists polled by Reuters had expected output would be revised up to only a 3% rate.

The third-quarter pace is the fastest since the first quarter of 2012 and marked an acceleration from the April-June period's 2.5% rate.

Businesses accumulated $116.5 billion worth of inventories, the largest increase since the first quarter of 1998. That compared to prior estimates of only $86 billion.

Inventories accounted for a massive 1.68 percentage points of the advance made in the July-September quarter, the largest contribution since the fourth quarter of 2011.

The contribution from inventories had previously been estimated at 0.8%. Stripping out inventories, the economy grew at a 1.9% rate rather than the 2% pace estimated last month.

A gauge of domestic demand rose at just a 1.8% rate.

The strong inventory accumulation in the face of a slowdown in domestic demand means businesses will need to draw down on stocks, which will weigh on GDP growth this quarter.

Fourth quarter growth estimates are already on the low side, with a 16-day shutdown of the government in October expected to shave off as much as half a percentage point from GDP.

Consumer spending, which accounts for more than two-thirds of US economic activity, was revised down to a 1.4% rate, the lowest since the fourth quarter of 2009. 

Spending had previously been estimated to have increased at 1.5% pace.

Consumer spending grew at a 1.8% rate in the April-June period.

There were upward revisions to business spending, but estimates for residential construction were lowered. The trade deficit was larger than previously estimated, resulting in trade being neutral to growth in the third quarter.