The US economy expanded at a higher rate in the third quarter than previously estimated, growing an annualized 4.1 per cent, up from 3.6 per cent, the Government said Friday.
The seasonally adjusted growth in gross domestic product was the fastest since the fourth quarter of 2011.
“The economy is stronger than it has been in a very long time,” President Barack Obama said.
Strong growth in business inventories — at a three-year high — drove the third-quarter data, accounting for about a third of the quarterly expansion. The surge was bolstered in the revision by consumer spending and business investment, especially in software, which were stronger than previously estimated, the Bureau of Economic Analysis said.
An initial third-quarter estimate of 2.8 per cent growth in the July-September period was already revised upward in early December before Friday’s final number.
After the US expansion screeched nearly to a halt with annualized 0.1 per cent growth in the final quarter of 2012, the economy has rebounded. GDP growth rose to 1.1 per cent in the first quarter and 2.5 per cent in the April-to-June period.
With federal spending in decline since austerity measures took effect in March, private-sector GDP growth was 5 per cent.
Obama touted the expansion of US payrolls by 2 million workers in 2013 and 8 million jobs regained since early 2010, after a Government report that economic growth was near a two-year high.
“We head into next year with an economy that’s stronger than it was when we started the year,” he said at the White House in a year-end press conference.
“More Americans are finding work and experiencing the pride of a paycheck. Our businesses are positioned for new growth and new jobs.
And I firmly believe that 2014 can be a breakthrough year for America.” Obama decried Congress’ failure to pass an extension to emergency long-term unemployment insurance. Without it benefits will expire for 1.3 million people on December 28.
The White House estimated that 2.6 per cent of the workforce has been unemployed for more than six months, including many who have been jobless for more than a year.
Obama pointed out that the extended benefits apply only to workers still actively looking for jobs or undergoing training, who “will lose a vital economic lifeline at Christmas-time, leaving a lot of job seekers without any source of income at all. I think we’re a better country than that.”
The upward revision in GDP follows Wednesday’s announcement by the US Federal Reserve that it will begin modestly reducing its extraordinary monetary policy in January, reducing cash infusions into money markets by $10 billion a month to $75 billion.
The so-called quantitative easing, delivered through purchases of Government-linked bonds, was likely to continue at a gradually slowing rate through at least late 2014, Fed Chief Ben Bernanke said.
The central bank reiterated that its key short-term bank interest rate, which has been at an unprecedented near-zero since December 2008, was likely to remain in place "for a considerable time" — probably for years — after the bond purchases are tapered off.
Growth seemed poised to cool at least somewhat in the fourth quarter, which ends December 31.
The sharp growth in third-quarter business inventories could foreshadow slower orders for the October-December period as companies work down stockpiles. Wall Street is watching consumer spending closing during the ongoing Christmas shopping season ahead of Wednesday’s holiday.
Consumer spending rose to a 2 per cent annualised growth rate in the third quarter from 1.8 per cent three months earlier. Consumer spending accounts for about 70 per cent of the $17 trillion US economy.
Fourth-quarter GDP is likely to be dented by the October deadlock in Congress, which saw non-essential Government operations idled for 16 days in the absence of budget legislation. A temporary, last-minute deal staved-off a technical default on federal obligations, but consumer confidence still plummeted in October and November.
Since then, congressional negotiators forged an unusual two-year budget agreement, which won final approve on Wednesday in the Senate.
Implementing legislation to authorise spending through September 2015 is slated for passage in the coming weeks.
"The American people won’t be exposed to the threat of another reckless shutdown every few months, so that’s a good thing," Obama said.
"It’s probably too early to declare an outbreak of bipartisanship, but it’s also fair to say that we’re not condemned to endless gridlock." The advance estimate of fourth-quarter US GDP is scheduled for January 30.