Washington - The US economy expanded at a faster pace in the third quarter than previously reported, reflecting a smaller hit from efforts to rein in bloated inventories.
Gross domestic product, the value of all goods and services produced, rose at a 2.1% annualised rate, up from an initial estimate of 1.5%, Commerce Department figures showed on Tuesday in Washington. The report also showed corporate profits slumped while worker incomes jumped.
The consumer continues to power the US economy, with cheap gasoline giving households the means and greater job security giving them the confidence to spend.
Still, company stockpiles remained elevated compared with sales, indicating that new orders and production will cool further to clear shelves and warehouses heading into 2016.
“Inventory levels still have to come down, and that’s going to put pressure on the fourth quarter,” said Russell Price, senior economist at Ameriprise Financial in Detroit, who correctly forecast the GDP revision. “Consumers are still doing very well.”
The rate of growth matched the median forecast of economists surveyed by Bloomberg. Estimates ranged from 1.5% to 2.4%. The GDP figure is the second of three for the quarter, with the other release scheduled for late December when more information can be incorporated.
First half
The economy grew at an average 2.3% pace in the first half of the year as a 3.9% surge in the second quarter more than made up for a first-quarter slowdown caused by bad weather, a labour dispute at West Coast ports and weakness in the energy industry.
The revisions to third-quarter GDP showed the pickup in growth estimates last quarter was concentrated in stockpiles. Inventories grew at a $90.2bn annualized rate from July through September, almost twice as much as previously estimated.
Still, the slowdown in stockpiling from the second quarter, when it grew at a $113.5bn rate, reduced growth by 0.6 percentage point. That compared to a previously reported drag of 1.4 points.
Inventories climbed earlier this year as weak growth abroad and a stronger dollar left manufactured goods to pile up in US, O’Sullivan said. Bloated stockpiles bolster the headline growth figure, while a drag on GDP occurs as companies trim those inventories to match demand.