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US third quarter GDP beats advance estimate

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US third quarter GDP beats advance estimate

The US economy expanded at a faster rate in the third quarter than initially estimated, according to a revised reading from the Commerce Department. GDP expanded at an annualized rate of 3.6 percent in Q3, compared to an initial estimate of 2.8 percent.

Gross domestic product is the most closely watched indicator of economic growth. It measures changes in the total value of goods and services produced in the economy.

The economy accelerated at the fastest pace since the first quarter of 2012, led by growth in private inventory investment that was larger than previously estimated. Inventories rose at the fastest pace since 1998, having been revised up from $86 billion to $116.5 billion.

According to an official Commerce Department statement, “The acceleration in real GDP growth in the third quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an acceleration in state and local government spending that were partly offset by decelerations in exports, in [personal consumer expenditures], and in non-residential fixed investment.”

Consumer spending was revised downward from 1.5 percent to 1.4 percent, the smallest quarterly jump since Q4 2009. Consumer spending in the United States continues to be restrained, as households struggle with tax hikes, a volatile job market and an uncertain fiscal future. However, October saw signs of modest improvement in the consumer segment after retail sales unexpectedly rose 0.4 percent. Retail sales excluding automobiles, gas and building materials rose 0.5 percent, according to official government data.

The revised figures lend support to a Federal Reserve bond taper sooner than expected, according to Matthew Kaufler of Federated Investors Inc. The Fed has been purchasing US Treasuries and mortgage-backed securities at an $85 billion pace since September 2012. The first asset taper won’t come before March 2014, according to a median estimate of economists surveyed by Bloomberg.

The US economy appears poised for a strong fourth quarter, despite the 16-day government shutdown. The cumulative impact of the shutdown is yet to be seen, although initial estimates show the impasse cost the US economy $24 billion.

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