Gross domestic product expanded at a 3.1 percent annual rate, the Commerce Department said, a step-up from the 2.7 percent pace it reported last month. It was the fastest growth since late 2011 and beat economists expectations for a 2.8 percent pace. In addition to upward revisions to exports and government spending, consumer spending was also a bit stronger than earlier thought.
"We still expect growth to decelerate in the fourth quarter. Beyond that, all will depend on the resolution of the fiscal cliff negotiations," said Nigel Gault, chief US economist at IHS Global Insight in Lexington, Massachusetts. In second report, the Philadelphia Federal Reserve Bank said its business activity index rose to 8.1 from minus 10.7 in November, boosted by a rebound in new orders and shipments. That is a hopeful sign for the manufacturing sector, which has slowed in recent months.
Separately, the National Association of Realtors said existing home sales surged 5.9 percent in November to a seasonally adjusted annual rate of 5.04 million units. It was the highest since November 2009 and confirmed the housing market recovery was strengthening.
In a fourth report, the Labour Department said initial claims for jobless benefits increased 17,000 to a seasonally adjusted 361,000, in the low end of the range they held before Superstorm Sandy struck in late October. The data covered the survey period for the government's report on December nonfarm payrolls and suggested modest job gains. "The pace of hiring is still disappointing," said Tanweer Akram, a senior economist at ING Investment Management in Atlanta, adding that the pace of GDP growth in the current quarter "remains quite soft."
A Reuters poll of economists earlier this month showed a median forecast for GDP growth in the current quarter of just a 1.2 percent annual pace. Economists expect GDP to expand just 1.9 percent next year. Job gains so far this year have averaged 151,000 per month, a pattern that is likely to hold through December. Exports grew at a 1.9 percent rate, rather than 1.1 percent, helping to narrow the trade deficit. Trade contributed 0.38 percentage point to GDP growth. The drop in imports is a sign of weak domestic demand.
Government spending was revised to a 3.9 percent growth rate from 3.5 percent, boosted by a rebound in state and local government outlays. It added three quarters of a percentage point to GDP growth in the third quarter.
While growth in consumer spending, which accounts for about 70 percent of US economic activity, was raised by 0.2 percentage point to a 1.6 percent rate, that was mostly due to increased spending on healthcare. Business inventories were trimmed to $60.3 billion from $61.3 billion. Restocking by businesses contributed 0.73 percentage point to GDP growth. Excluding inventories, GDP rose at a revised 2.4 percent rate. Final sales of goods and services produced in the United States had been previously estimated to have increased at a 1.9 percent pace.