Washington, DC, Nov. 25--The economy roared ahead at an even faster pace this summer than previously thought, spurred by stronger business spending, turning in its best performance in nearly two decades.
Gross domestic product was revised to an 8.2% annual rate for the third quarter, the Commerce Department reported Tuesday.
That was a full percentage point higher than the 7.2% initial estimate from the government, and even higher than the strong 8% growth economists had forecast, according to a survey by Dow Jones and CNBC.
The economy's blistering run in the third quarter, which was more than double the 3.3% growth recorded in the second quarter, marked its best quarterly performance since a 9% surge in the first three months of 1984.
The new estimate, based on more complete data, reflected stronger investment by business on new equipment and software, less severe cuts in companies' inventories and more brisk spending on residential projects.
"I think there's a better mix of growth in this report, with capital spending being a major portion of the upward revision," said economist Ken Mayland, president of ClearView Economics. "The economy is regaining the confidence of businesses and they are stepping up to the plate and spending and investing for the future."
After-tax profits increased at a 10.6% annual rate in the third quarter, after falling 5% in the second quarter.
Business spending advanced by 14%, its strongest in three years, and several percentage points higher than the initial reading of 11.1%. Spending on equipment and software climbed 18.4%, its best run in five years and much higher than the initial reading of 15.4%.
Businesses trimmed inventories by $14.1 billion, less than half what it was initially recorded at, $35.8 billion. That added 0.16 of a percentage point to GDP growth.
Analysts believe the economy will grow at a slower, but still healthy rate of at least 4% in the fourth quarter as some of the stimulus provided by the tax cuts and a surge in mortgage refinancing fade. Against this backdrop, Federal Reserve policy-makers are expected to hold a key short-term interest rate steady at a 45-year low of 1% at its next meeting on Dec. 9.
