The U.S. economy grew at a slower pace than originally believed in the third quarter, mainly because companies reduced inventories and did not invest as much.
The Commerce Department cut its calculation of gross domestic product to 2.0% growth in the July-to-September period from an initial reading of 2.5%. Economists surveyed by MarketWatch expected the government to trim its estimate to 2.3%.
Still, the 2.0% growth rate was the fastest since the fourth quarter of 2010. Most economists predict the U.S. will grow even faster in the final three months of this year — 2.5% based on the latest MarketWatch forecast.
The economy only grew at a 1.3% rate in the 2011 second quarter and 0.4% in the first quarter.
The government’s second estimate of GDP includes more data from the private sector that was not fully available earlier, such as corporate profits, inventory levels and trade data. As a result, it paints a more accurate picture of U.S. growth.
While the economy accelerated in late summer, the U.S. is still not growing fast enough to put most Americans who want a job back to work. The unemployment rate stood at 9.0% in October.
What’s more, the U.S. is growing at a much slower pace than is usually the case in a recovery. Growth rates of 3% or more are more common.
Inside the data
In the third quarter, consumer spending rose 2.3%, down from an original reading of 2.4%. Consumer spending typically accounts for two-thirds or more of U.S. economic growth.
Businesses investment, initially reported to have risen 4.1%, actually fell 0.9% in the third quarter, according to the revised data.
The downward revision was largely linked to a decline in inventories, which fell $8.5 billion after jumping $39.1 billion in the second quarter.
In addition, investment in nonresidential equipment rose 14.8% in the third quarter compared to a first reading of 16.3%.
Corporate profits also slowed in the third quarter. Companies boosted their profits by $39.8 billion, compared to a $61.2 billion increase in the prior quarter.
Exports rose 4.3% instead of 4.0% as originally reported. Domestic manufacturers have led the U.S. recovery since the end of the last recession, particularly by boosting exports.
Yet imports rose a much smaller 0.5% compared to an initial reading of 1.9%. Imports subtract from GDP.
Excluding imports, final sales of goods and services purchased in the U.S. were left unchanged at a 3.6% increase. That category is viewed as a good gauge of domestic demand.
Government spending at all levels dipped 0.1% in the third quarter. It was originally reported as flat.
Inflation, as measured by the consumer PCE index, rose 2.3%, down from a prior reading of 2.4%. Excluding food and energy, the index rose 2.0% instead of an originally reported 2.1%.