The US economy grew at a slightly slower pace than previously estimated in the third quarter, but weak inventory accumulation amid sturdy consumer spending strengthened views output would pick up in the current quarter.
Gross domestic product grew at a two per cent annual rate in the third quarter, the Commerce Department has said in its second estimate, down from the previously estimated 2.5 per cent.
While the revision was below economists' expectations for a 2.5 percent growth pace, the composition of the GDP report, especially still-firm consumer spending and the first drop in businesses inventories since the fourth quarter of 2009 set the platform for a stronger economic performance this quarter.
Data so far suggest the fourth-quarter growth pace could exceed 3 percent, which would be the fastest in 18 months.
Despite the downward revision, last quarter's growth is still a step-up from the April-June period's 1.3 per cent pace. Part of the pick-up in output during the last quarter reflects a reversal of factors that held back growth earlier in the year.
A jump in fuel prices had weighed on consumer spending earlier in the year, and supply disruptions from Japan's big earthquake and tsunami in March had curbed auto production.
The government revised third-quarter output to account for an $8.5bn drop in business inventories, which lopped off 1.55 percentage points from GDP growth. Inventories had previously been estimated to have increased $5.4bn.
The drag from inventories was offset by strong export growth. Excluding inventories, the economy grew at an unrevised brisk 3.6 per cent pace after expanding 1.6 per cent in the second quarter.
Consumer spending was revised slightly down to a 2.3 per cent growth pace from 2.4 per cent because of adjustments to motor vehicle fuels and lubricants.
It was still the quickest pace since the fourth quarter of 2010.
However, weak income growth could crimp spending. The report showed real disposable income fell 2.1 per cent in the third quarter after declining 0.5 per cent in the prior three months.
There were also small revisions to business investment, which rose at a 14.8 per cent rate instead of 16.3 per cent as estimates for investment in nonresidential structures and outlays on equipment and software were lowered.
City A.M. Reporter