U.S. economic growth was far stronger than initially thought in the third quarter, pointing to strengthening fundamentals that should support the economy for the rest of the year.
The Commerce Department on Tuesday raised its estimate of gross domestic product to a 3.9% annual pace from the 3.5% rate reported last month, reflecting upward revisions to business and consumer spending.
Growth had increased at a 4.6% rate in the second quarter. The economy has now experienced the two strongest back-to-back quarters of growth since 2003.
Economists had expected growth would be cut to a 3.3% pace.
Inventories were also revised higher, with restocking now only accounting for a mild drag to GDP growth. That also helped to offset downward revisions to export growth.
Inventories, however, could weigh on growth in the final three months of the year. Spending on residential construction was also revised higher.
It was the fourth quarter out of the past five that the economy has expanded above a 3.5% pace. Data ranging from manufacturing to employment and retail sales suggest the economy retained some of that momentum early in the fourth quarter.
The U.S. GDP report also showed corporate profits after tax grew at a 3.2% rate in the third quarter, slowing from the second quarter's robust 8.6% pace.
