USA economy grew more than expected in third quarter

USA economic growth for the third quarter has been revised up due to stronger investment and house building.

The Commerce Department also reported that corporate profits after tax fell at a 1.6 per cent rate in the third quarter after rising at a 2.6 per cent pace in the second quarter.

The US economy grew faster in the third quarter than originally reported, though by no means at a breakneck pace. As a result, economists predict GDP growth will speed up to 2.7% in the fourth quarter. That is better than a previous estimate of 1.5 percent growth. Gross Domestic Product (GDP) was revised higher for 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. Bloomberg and Dow Jones were both looking for headline GDP to come in at 2.1% as well.

The fear was that the global economic slowdown and strong US dollar were weighing down USA trade and exports.

Consumer spending, which drives about two-thirds of the activity in the United States economy, rose 3.0 percent in the third quarter, a notch less than the 3.2 percent previously estimated.

The good news for consumers is that incomes are picking up.

GDP measures have been heavily revised in recent quarters, making the initial data more hard to interpret.

The Commerce Department also reported a drop in corporate profits, which was expected. Such an increase would be the Fed’s first since the financial crisis.

Last quarter’s growth reading was at odds with data on total earnings.

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.

In particular, Fed officials said the jobs market is improving and inflation is starting to move towards their 2 per cent annual target.

The Obama administration highlighted the growth in investment in the housing market, one of the bright spots of the economy. Meanwhile applications for unemployment benefits are bouncing around the lowest level in about four decades. “And given the lack of inflationary pressures, we believe that the pace of tightening will be slow, as indicated by Fed chief Janet Yellen”.

The latest figures are unlikely to dissuade Federal Reserve officials from raising rates at their meeting next month, economists said.

Members of the Federal Reserve have suggested they want to hike interest rates in December, following minutes of the central bank’s October meeting.