U.S. Economy Grew 2.5% in Third Quarter, Revised From 2%

The U.S. economy grew at a 2.5 percent annual rate in the third quarter, more than previously calculated, as companies increased shipments abroad and Americans boosted their spending.

Real consumer spending increased at a 2.8% annualized clip, the fastest in nearly four years, compared with the 2.6% initially estimated. Spending on durable goods increased 7.4%, spending on nondurable goods rose 1.8% and spending on services grew by 2.5%.

Consumer spending contributed slightly less than two percentage points to growth.

Real disposable personal incomes increased at a 0.9% annual rate in the third quarter, compared with a 0.5% estimate. Income in the second quarter was also revised higher.

Investments in houses dropped at a 27.5% annual pace, revised from 29.1% earlier.

Residential investments cut 0.8 of a percentage point from the revised growth rate.

Business fixed investments increased at a 10.3% annual pace, revised up from 9.7% earlier. Investments in equipment and software rose 16.8%, while investments in structures decreased 5.7%. Business investments contributed 1 percentage point to growth.

Private businesses increased inventories by $111.5 billion, down slightly from the initial estimate of $115.5 billion. The change in inventory investment added 1.3 percentage points to growth.

The trade sector was less of a drag on growth that initially estimated.

Exports rose a revised 6.3%, up from the initial estimate of 5%. Meanwhile, imports rose a revised 16.8%, slightly lower than previous estimates The trade deficit cut 1.76 percentage points from growth compared with the initial estimate of 2%.

Government spending rose 4.0% in the third quarter. Federal spending rose 8.9%, including an 8.5% rise in national defense spending. State and local government spending rose 0.8%. Government spending contributed 0.8 of a percentage point to growth.

Meanwhile, the GDP data indicated that inflation pressures in the economy remained muted.

The core personal consumption price index increased at a 0.8% annual rate, the smallest quarterly increase since the fourth quarter of 2008.

TradingEconomics.com, BloombergReal consumer spending increased at a 2.8% annualized clip, the faste
11/23/2010 4:15:18 PM