U.S. economy grew 3.1% in third quarter, more than forecast

The U.S. economy grew at a 3.1 percent annual rate in the third quarter, more than previously reported, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap.

The revised gross domestic product reading exceeded the highest projection in a Bloomberg survey and compared with a previously estimated 2.7 percent gain, according to Commerce Department figures released today in Washington. The median estimate of economists called for a 2.8 percent advance.

The world’s largest economy will be hard-pressed to maintain that pace of growth this quarter as global demand cools and companies limit spending and hiring ahead of looming tax increases and spending cuts. While a stronger housing market will provide some cushion, the Federal Reserve is pursuing record stimulus aimed at driving bigger gains for the expansion.

“We’re going to have some weakness closing out this year and starting off next year,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “We really want to see business investment coming back because, ultimately, that’s going to lead to hiring.”

The number of Americans filing first-time claims for unemployment insurance payments rose for the first time in five weeks, a separate Labor Department report today showed.

Jobless Claims

Applications for jobless benefits increased by 17,000 to 361,000 in the week ended Dec. 15. Economists forecast 360,000 claims, according to the Bloomberg survey median.

Stock-index futures were little changed after the figures, with the contract on the Standard & Poor’s 500 Index expiring in March falling less than 0.1 percent to 1,432.8 at 8:57 a.m. in New York.

Projections for economic growth from the 80 economists surveyed ranged from gains of 2.6 percent to 3 percent. Today’s figure marked the third reading for the quarter. The economy expanded at a 1.3 percent pace in the prior three-month period.

Consumer spending rose at a 1.6 percent annual pace from July through September, compared with the 1.4 percent advance previously reported and a 1.5 percent rise in the prior quarter. Household purchases contributed 1.12 percentage points to growth in the third quarter. The gain primarily reflected more spending for health care services, the agency said.

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