The U.S. economy grew more rapidly than initially believed in the third quarter, as solid consumer and business spending more than offset a lower estimates for exports.
Gross domestic product expanded at a seasonally adjusted annual rate of 3.9% in the three months ended Sept. 30, higher than the 3.5% first estimated, the Commerce Department said Tuesday. Economists expected a downward revision to 3.3% growth, according to the median forecast in Action Economics’ survey.
Falling gasoline prices left consumers more discretionary cash, boosting consumer spending by 2.2%, vs. the 1.8% first estimated.
Business investment rose 7.1%, more sharply than initially believed. Equipment spending was particularly strong as companies replaced aging computers and other gear and factories bought new machines to expand capacity stretched near its limits. .
Business stockpiling slowed less than the government had estimated, also contributing to the improved GDP growth rate.
But exports increased just 4.9%, below the 7.8% previously estimated.
The economy generally is benefiting from the ability of both consumers and businesses to shed debt since the recession ended in 2009, clearing a path for higher spending. Meanwhile, federal, state and local governments also are on better financial footing, causing their aggregate spending to grow solidly in the third quarter after dipping the previous quarter.
Overall, the economy has notched the best six months of growth since 2013, including a 4.6% annualized rate of expansion in the second quarter, following a first-quarter contraction caused largely by severe winter weather. Monthly job growth has picked up this year, and factory output and business investment have advanced, while consumer spending and the housing market have been mixed.
Economists expect growth to slow in the current quarter but pick up next year as stronger wage growth and low gasoline prices drive consumer spending.
“The U.S. recovery is firmly on track,” James Marple, senior economist at TD Economics, wrote in a note to clients.” Driven by strengthening consumer spending and business investment, domestic demand is likely to accelerate to above 3.0% over the next year.”