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At 4.1%, GDP Shows Biggest Gain Since 2011
WASHINGTON (12/23/13)--The U.S. economy grew at an annualized rate of 4.1% in the third quarter--the fastest pace since the fourth quarter of 2011--according to revised data released Friday by the U.S. Commerce Department.
 
The upward revision from 3.6% was largely due to more complete data on consumer spending. The Commerce Department said Thursday that consumer expenditures grew by an annual rate of 2%, instead of the previously estimated 1.4% (The Wall Street Journal Dec. 20). On a quarterly basis, this tweak added 0.4% to growth (Economy.com Dec. 20).
 
Business spending and non-residential fixed investment also rose on a year-over-year basis to 4.8%, from 3.5%.
 
Export growth was revised up slightly on annual basis to 3.9% from 3.7%.
 
Economists surveyed by Dow Jones had predicted no revisions to aggregate third-quarter gross domestic product (GDP) growth.
 
The Federal Reserve accounted for the economy's recent growth when it decided last week to scale back its $85 billion monthly quantitative easing by $10 billion (The New York Times Dec. 20).
 
Fed officials said that they expect GDP to grow by 2% this year, and by between 2.8% and 3.2% next year, according to The Wall Street Journal. A survey conducted by the newspaper showed economists expect an average of between 2.5% and 3% GDP growth in 2014.
 
A two-year budget passed this month by both houses of Congress is expected to contribute to next year's predicted expansion, with the deal reversing recent sequestration cuts. Third-quarter data also saw public spending make its first contribution in a year, driven by increases in state and local outlays.
 
Moody's analysts cautioned that future growth could take a hit. Inventory growth contributed to more than 40% of third-quarter economic expansion, dampening analysts' outlook for the fourth quarter. Real disposable income also grew at 3%, down from 4.1% in the second quarter. Gross domestic income, an alternative measure of economic growth, shrank to 1.8% from 3.2%--the slowest growth in a year.
 
GDP growth that doesn't account for inventory accumulation only increased to 2.5% from 2.1% in the second quarter. The third quarter also doesn't cover October, when the partial government shutdown significantly slowed economic growth. The analysts did note, however, that both the labor market and housing market appear to have recovered from the worst of the Great Recession.


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