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U.S. 3Q Growth Up as Firms Stockpile Inventory

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December 5, 2013 by   Leave a Comment

The economy expanded much faster than first thought in the third quarter, as the government today (Dec. 5) revised its estimate of growth in the period to a 3.6% annual rate from 2.8%.

That was significantly better than the 3.1% pace economists had been expecting, and it marked the best quarter for growth since the first quarter of 2012, when output jumped by 3.7%. It also marked the first time since then that growth had exceeded 3%.

Much of the improvement came from additional stocking up on inventory by businesses as well as a slightly improved trade picture.

Inventory changes are notoriously volatile, so while the healthier signals would be welcomed by economists, inventory gains can essentially pull growth forward into the third quarter, causing fourth-quarter gains to slacken.

Indeed, Wall Street was already estimating that the fourth quarter of 2013 would be much weaker than the third quarter, with growth estimated to run at just below 2 percent, according to Bloomberg News.

The anemic pace of fourth-quarter growth also stems from the fallout of the government shutdown in October, as well as the continuing fiscal drag from spending cuts and tax hikes imposed by Congress earlier in 2013.

Still, if the better data on growth from the Commerce Department on Thursday is followed by more robust numbers Friday for the nation’s November job creation and unemployment, it increases the odds the Federal Reserve will soon ease back on stimulus efforts. The jobs data is scheduled to be released by the Labor Department at 8:30 a.m. Friday.

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