Washington, DC, November 29, 2006--The economy grew at a 2.2% annual pace in the third quarter, a bit faster than the 1.6% initially estimated, but down from the 2.6% in the previous quarter, the Commerce Department reported Wednesday in its first revision to the gross domestic product report.
Revisions came largely from greater building of inventories and lower imports than originally assumed. Business investment also grew more than first estimated, while consumer spending was slightly slower. Read the full government report.
Final sales of domestic product increased 2.1%, up from the 1.7% originally reported.
The report "will go a long way toward marginalizing the market's recession fears," wrote economists for Action Economics on their Web site.
The average forecast of economists for fourth-quarter growth is about 2.3%. Shapiro is penciling in growth of about 1%.
A key measure of core inflation was revised a tenth of a percentage point lower, to 2.2%. Year-over-year growth in the core personal consumption expenditure price index was unrevised at 2.4%, thus remaining well above the Federal Reserve's implied target of 1% to 2%.
The economy has grown 3% in the past year in real terms, just about the rate economists say is the long-term potential. In nominal terms, GDP was at an annual rate of $13.33 trillion in the third quarter.
Economists had expected GDP to be revised up to 1.8%.
As in the first GDP estimate, consumer spending accounted for most of the economic growth, with business investment also contributing.
A third of the growth came from the output of motor vehicles. Conversely, residential investment and net imports were a drag on growth.
Excluding motor vehicle output, GDP grew 0.9%, according to the government's revised data.
