GDP Surges at 5.5% Rate in 3rd Quarter

The U.S. economy surged ahead at a much faster pace than previously thought over the summer as companies struggled to keep pace with the unrelenting increase in consumer spending, the government said Wednesday.

Gross domestic product, the broadest measure of activity in the world’s biggest economy, rose at a steep 5.5% annual rate in the July-September period--well above the Commerce Department’s first estimate of 4.8%, released a month ago.

The revised report on the third quarter exceeded economists’ expectations of a 5% annual rate of GDP growth. The growth spurt followed a more modest 1.9% annualized rate in the second quarter.

Despite such strong economic growth, the report said prices remained muted in the third quarter, registering an annual 1.1% increase in the implicit price deflator, one of several ways of measuring inflation.

The government said the upward revision in third-quarter growth was due mostly to larger-than-estimated increases in corporate inventories as firms stocked up to meet brisk consumer demand, the main engine behind the now almost 9-year-long U.S. economic expansion.

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Growth Up, Inflation Down

Quarterly economic growth, as reflected by the gross domestic product, and inflation rates, both annualized, for the last six years:

Growth

3rd quarter 1999:

5.5%

Inflation

3rd quarter 1999:

1.1%