Washington, DC, Nov. 26--The U.S. economy grew at a 4% annual rate in the summer, a stronger performance than the government previously thought.
The latest reading on gross domestic product, considered the best barometer of the nation's economic health, showed the economy growing at a faster pace in the third quarter than the 3.1% growth rate first estimated a month ago, according to the Commerce Department.
GDP measures the total value of goods and services produced within the U.S. The revised reading, based on more complete data, also exceeded analysts expectations. They were forecasting a 3.8% growth rate in the third quarter.
Stronger inventory building by businesses, increased government spending and an improved trade picture were the major reasons behind the upward boost to third quarter GDP.
The economy's more than respectable speed registered in the third quarter contrasted with the 1.3% growth rate seen in the second quarter of this year and marked the best performance since a 5% pace posted in the first three months of this year.
However, even with the third quarter rebound, many economists predict the economy is losing momentum in the current quarter.
Some analysts are forecasting a fourth quarter economic growth rate of little more than 1%. Forecasters at the National Association for Business Economics have trimmed their forecast for economic growth in the current quarter to a rate of 1.4%, down from a 2.7% rate estimated just two months ago.
Still, most don't foresee the economy falling back into recession.
NABE forecasters also cut their forecast for economic growth in the first quarter of 2003 to just a 2.5% rate, compared with a 3.3% growth rate.
In the third quarter, businesses replenished stockpiles of unsold goods, adding 0.5% to GDP, a big factor in the upward revision to the overall GDP figure. The government had previously estimated that inventories had subtracted from economic growth.
Another factor in the stronger third quarter GDP showing: government spending grew at a 3.1% pace in the third quarter, more brisk than the 1.8% previously estimated.
An improved trade picture also helped out as exports grew at a 3.3% pace in the third quarter, compared with the 2.1% growth rate estimated a month ago.
Consumer spending grew at a rate of 4.1% in the third quarter. That was slightly slower than the 4.2% pace first estimated but much stronger than the 1.8% rate posted in the second quarter.
Business investment in equipment and software grew at a 6.6% rate in the third quarter, twice as fast as in the second quarter, providing an encouraging sign. A sustained turnaround in capital investment is a necessary ingredient for the economy's full recovery. But businesses continued to cut investment in new plants, offices and other buildings in the third quarter.
