Washington, DC, November 30, 2005 --The U.S. economy grew at a 4.3% annual rate in the third quarter, the Commerce Department said Wednesday in its first revision of gross domestic product estimates.
It's the fastest growth since the first quarter of 2004.
A month ago, the government agency estimated real growth in the July through September period at 3.8% annualized. Economists were expecting a revision to 4%.
The economy grew at a 3.3% pace in the second quarter and has now grown faster than 3% for 10 straight quarters.
The economy has grown 3.7% in the past four quarters.
In current dollar terms, GDP was estimated at an annual rate of $12.6 trillion, up 7.4% from the second quarter.
The upward revision in GDP was largely due to higher spending on nondurable goods and to more investments in homes and in business equipment and software.
As in the earlier estimate, growth was powered by consumer spending and business investments. Residential investments and government spending also added to growth. Trade and inventories were a drag on growth.
The core personal consumption expenditure price index, a key measure of inflation was revised lower to reflect an increase of 1.2% annual rate in the period, compared with an earlier estimate of 1.3%. All consumer prices, including food and energy, rose at a 3.6% rate, down from 3.7% estimated earlier.
Corporate profits from current production, meanwhile, fell 3.4%, or $45.5 billion annualized, in the quarter on losses due to Hurricanes Katrina and Rita, the Commerce Department said. Excluding the impact of the storms, profits would have risen 7.8%, or $105.7 billion.
Profits are up 16.5% from a year earlier.
The report also showed a significant downward revision in wages and salaries. In the second quarter, wages increased $42.4 billion, down from $80.3 billion.
Real disposable incomes increased 0.2% in the second quarter and declined 0.7% in the third quarter. Real disposable incomes are up 1.1% in the past year.
Real final sales increased 4.7% in the quarter.
Consumer spending increased 4.2% in the third quarter, contributing about 3 percentage points of the 4.3% increase. Spending on durable goods (mostly vehicles) increased 10.5%, while spending on nondurable goods increased 3.6% and spending on services increased 3.3%.
Motor vehicle output contributed about 0.6 percentage points to growth in the quarter, the most in two years.
Business investments increased at an 8.8% pace, contributing 0.9 percentage points to growth. Investments in equipment and software increased 10.8%, revised from an earlier estimate of 8.9%. Such investments have increased at double-digit rates in seven of the past nine quarters.
Investments in nonresidential structures increased 2.7%, revised from a decline of 1.4%.
Investments in residences increased at an 8.4% pace, revised from 4.8%
Inventories declined by $13.4 billion, revised from a decline of $16.6 billion, subtracting about 0.4 percentage points from growth.
Net exports decreased $621.3 billion at an annual rate in the third quarter, subtracting about 0.3 percentage points from growth.
Government spending increased at a 3.2% annual rate, including 8.1% for federal spending. Defense spending increased at a 10.3% rate. Government spending contributed 0.6 percentage points to growth.
