U.S. GDP Growth Upwardly Revised By More Than Expected In Q3

USGDP 112916

With consumer spending increasing by more than initially estimated, the Commerce Department released a report on Tuesday showing a bigger than expected upward revision to the pace of gross domestic product growth in the third quarter.

The report said GDP climbed by 3.2 percent in the third quarter compared to the initially estimated 2.9 percent increase. Economists had expected the pace of growth to be upwardly revised to 3.0 percent.

The upwardly revised GDP growth in the third quarter compares to the 1.4 percent increase seen in the second quarter and marks the strongest growth in two years.

The stronger than previously estimated GDP growth primarily reflected an upward revision to consumer spending, which climbed by 2.8 percent compared to the previously reported 2.1 percent increase.

However, the Commerce Department said the upward revision to consumer spending was partly offset by downward revisions to non-residential fixed investment and private inventory investment.

Along with the increase in personal spending, the third quarter GDP growth also reflected positive contributions from exports, private inventory investment, and federal government spending.

The growth was limited by negative contributions from residential fixed investment and state and local government spending as well as an increase in imports, which are a subtraction in the calculation of GDP.

"Overall, a slightly better mix of growth and undoubtedly a strong headline gain," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "The fourth-quarter will be slightly weaker again, but the prospect of a sizable fiscal stimulus in the first half of next year means that we think GDP growth will be 2.7% in 2017."

A reading on core consumer prices, which exclude food and energy prices, showed that the pace of price growth slowed to 1.7 percent in the third quarter from 1.8 percent in the second quarter.

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