Buoyed by strong consumer spending and higher business investment, the US economy expanded in the third quarter at its fastest pace in two years, according to newly revised government figures. Gross domestic product climbed at a 4.1% annual rate from July through September, the Commerce Department said today. Previously the increase was reported as 3.6%.
The news pushed the US stock market up 70 points early morning trading.
Consumer spending, the main driver of the US economy, rose 2% instead a lackluster 1.4% as initially estimated. That’s roughly how fast consumer spending has risen in 2013. Unfortunately, most of the increase in consumer outlays was spent on gasoline and health care—necessities that deprive households of discretionary income to spend on other goods and services.
Business investment, meanwhile, was somewhat stronger, mainly on software and similar products. Spending on intellectual property jumped 5.8% instead of the prior estimate of 1.7%.The buildup in third-quarter inventories, which accounted for about 40% of overall third-quarter growth, was little changed. Companies stockpiled $115.7 billion worth of goods on warehouse shelves.
That surplus has economist worried as the new year winds down. They say that GDP could fall in the final months of 2013, perhaps sharply, if companies are unable to sell all the goods they stockpiled.