US Q3 GDP Grew More Than Expected At 2.8%

The U.S. economy grew at a 2.8 percent annualized rate in the third quarter, the Commerce Department said Thursday. That’s the biggest increase in a year and a half and topped economists’ estimate of a 2 percent rise.

The pickup in third-quarter gross domestic product growth was largely due to a bigger than expected boost from inventory accumulation. Stripping out inventories and external trade, the growth rate of final sales to domestic purchasers, which is a better gauge of underlying economic strength, slowed to 1.7 percent in the third quarter, from 2.1 percent in the second.

Investment in the housing sector remained strong with a 14.6 percent increase and exports outpaced imports. Private businesses increased inventories by $86 billion in the third quarter, following increases of $56.6 billion in the second quarter and $42.2 billion in the first.

Meanwhile, despite the modest ongoing impact of the sequestration cuts to federal spending, the public sector is no longer dragging the economy down. Total government consumption increased by 0.2 percent, driven by a 1.5 percent rebound in state and local government spending.

Consumer spending, which accounts for 70 percent of the U.S. economy, slowed to a 1.5 percent rise from 1.8 percent in the second quarter. Business investment increased by 1.4 percent, down from a 4.7 percent gain in the previous quarter.

"The pickup in GDP growth will presumably add to the speculation that the Federal Reserve might yet begin tapering its asset purchases in December, even though the ECB is loosening monetary policy in the euro zone," Capital Economics' Paul Ashworth wrote in a note to clients.

A separate report showed the number of new applications for unemployment benefits fell by 9,000 to 336,000 in the week ended Nov. 2, the Labor Department said Thursday. The four-week moving average, a less volatile gauge, declined by 9,250 to 348,250.