U.S. Grows at 3.6% Pace in 3rd Quarter
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Business Stockpiling Drives Gain; Slower Expansion Expected.
The U.S. economy expanded at a substantially faster pace in the third quarter than initially estimated due to businesses stockpiling inventories, a factor that will likely return fourth-quarter growth to a subdued pace.
Gross domestic product, the broadest measure of goods and services produced in the economy, grew at a 3.6% seasonally adjusted annual rate from July through September, the Commerce Department said Thursday. The reading revised the earlier 2.8% estimate and marked the strongest growth pace since the first quarter of 2012.
But the upgrade was almost entirely the result of businesses boosting inventories. The inflation-adjusted change to private inventories, as measured in dollars, was the largest since the first quarter of 1998.
As a result, inventories are likely to build more slowly or decline in the current quarter. That will lead overall growth in final months of the year to ease to a pace some economists estimate will be at or below 1%.
“The core piece of the economy remained on the metronome-like 2% growth clip” last quarter, Pierpont Securities chief economist Stephen Stanley said in a note to clients. If inventory building returns to its pace seen earlier in the year, fourth-quarter growth “will be close to flat.”
Real final sales—GDP excluding the change in inventories—rose just 1.9% in the quarter. That pace marked a slowdown from the second quarter.
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