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Strong consumer spending and business investment and a slightly lower than previously reported trade deficit meant the US economy grew at a 3.9 per cent rate in the third quarter, the Commerce Department said.
The upward revision from the 3.7 per cent advance estimate was above consensus expectations and represented a rebound from 3.3 per cent growth in the second quarter.
Core personal consumption expenditures inflation, excluding food and energy, the Federal Reserve's preferred measure of inflation, was unchanged at a 0.7 per cent rate in the quarter - the lowest reading since the 1960s.
The report provided further support for the Fed's case that the economy has picked up, after an earlier soft patch, and that with inflation under control it will be able to raise rates at a “measured” pace. Investors see another quarter point increase to 2.25 per cent as likely when the Fed meets later this month.
Consumer confidence dropped last month, dragged down by concerns about the labour market, the Conference Board reported. Economists had expected an improvement following the strong October employment report. The Conference Board index has declined in each of the past four months.
However, consumer spending rose at a 5.1 per cent in the third quarter, the Commerce Department said, stronger than its advance estimate and well above the 1.6 per cent rate recorded in the second quarter.
Business investment was revised up and equipment investment rose at a strong 17.2 per cent rate.
The US trade deficit in the quarter was revised down from $598bn to $588bn. Although export growth slightly outpaced import growth in the quarter, the deficit was still higher than in the second quarter.
Inventory accumulation slowed more than previously reported, a drag on growth in the quarter but a good sign for growth in the coming months.
Kathleen Stephansen, economist at Credit Suisse First Boston in New York, said the revisions pointed to more balanced growth - with consumer spending and business investment up, and improved trade position and lower inventories. “It is not a dramatic change but a better balance of growth and lower inventories bodes well for the fourth quarter,” she said.
Corporate profits from current production rose 8.4 per cent from a year ago, but dropped 2.4 per cent from the second quarter. Economists said the quarterly decline largely reflected insurance claims related to hurricane damage, but that the trend was still one of moderating profits after strong profit growth last year.
The upward revision from the 3.7 per cent advance estimate was above consensus expectations and represented a rebound from 3.3 per cent growth in the second quarter.
Core personal consumption expenditures inflation, excluding food and energy, the Federal Reserve's preferred measure of inflation, was unchanged at a 0.7 per cent rate in the quarter - the lowest reading since the 1960s.
The report provided further support for the Fed's case that the economy has picked up, after an earlier soft patch, and that with inflation under control it will be able to raise rates at a “measured” pace. Investors see another quarter point increase to 2.25 per cent as likely when the Fed meets later this month.
Consumer confidence dropped last month, dragged down by concerns about the labour market, the Conference Board reported. Economists had expected an improvement following the strong October employment report. The Conference Board index has declined in each of the past four months.
However, consumer spending rose at a 5.1 per cent in the third quarter, the Commerce Department said, stronger than its advance estimate and well above the 1.6 per cent rate recorded in the second quarter.
Business investment was revised up and equipment investment rose at a strong 17.2 per cent rate.
The US trade deficit in the quarter was revised down from $598bn to $588bn. Although export growth slightly outpaced import growth in the quarter, the deficit was still higher than in the second quarter.
Inventory accumulation slowed more than previously reported, a drag on growth in the quarter but a good sign for growth in the coming months.
Kathleen Stephansen, economist at Credit Suisse First Boston in New York, said the revisions pointed to more balanced growth - with consumer spending and business investment up, and improved trade position and lower inventories. “It is not a dramatic change but a better balance of growth and lower inventories bodes well for the fourth quarter,” she said.
Corporate profits from current production rose 8.4 per cent from a year ago, but dropped 2.4 per cent from the second quarter. Economists said the quarterly decline largely reflected insurance claims related to hurricane damage, but that the trend was still one of moderating profits after strong profit growth last year.