The US economy grew more briskly than first thought in the third quarter with robust car sales helping to more than triple the weak second-quarter pace while after-tax corporate profits also improved, the government said today.
US gross domestic product, a measure of all output within the country's borders, rose at a revised 4 per cent annual rate in the July-September period after a weak 1.3 per cent gain in the preceding quarter, the US commerce department said.
The revised growth rate came in above Wall Street economists' forecasts for a 3.8 per cent gain. The department had originally estimated that the economy expanded at a 3.1 per cent pace in the third quarter. Commerce said it raised its measure of growth for the period because inventory building by businesses was greater than first estimated, government spending stronger and the housing sector more robust.
A step-up in consumer spending, which rose at a 4.1 per cent clip after a meagre 1.8 per cent gain in the second quarter, accounted for most of the quarter-to-quarter improvement in the economy's performance. A sharp gain in auto sales on the back of zero-per cent financing deals and other incentives played a big role.
But the report showed a 0.7 per cent drop in business spending on facilities and equipment - the eighth consecutive quarterly decline - as the revisions erased a previously reported gain. However, within that category, spending on equipment and software staged a second straight quarterly advance. A collapse in business spending led the economy into recession last year, and analysts say a solid rise in corporate outlays is needed to ensure a healthy, sustainable recovery.
While growth in the third quarter was strong, several signs - including weakness in manufacturing and a slide in auto sales - had suggested the economy began to brake sharply as the quarter drew to a close, and economists expect much weaker growth in the final three months of the year.