Economy grows at stronger-than-expected 3.9% pace in third quarter

The economy grew faster in the third quarter than initially thought, expanding at a solid 3.9% annual rate, the Commerce Department said Tuesday.

The figure was unexpectedly better than the 3.5% annual rate the government reported in its first estimate last month.

Economists had forecast the growth rate would be revised down to 3.3%.

The Commerce Department produces three estimates of total economic output, also known as gross domestic product, for each quarter.

Third-quarter growth still was down from the 4.6% pace in the second quarter, but the decline was expected as much of the spring activity came from pent-up demand after the economy sharply contracted during a winter marked by severe weather.

Stronger consumer spending was a key factor in the upward revision of third-quarter growth, the Commerce Department said.

Spending increased 2.2% in the third quarter, better than the 1.8% increase in the first growth estimate.

Still, consumer spending growth slowed in the third quarter after increasing 2.5% in the second quarter.

Other factors in the third-quarter revision were a smaller than initially estimated drop in private business inventories and a larger increase in nonresidential investment, the Commerce Department said.

Federal government spending also played an important role in third-quarter growth, increasing 9.9%. Those expenditures decreased by 0.9% in the second quarter.

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