US revises third-quarter growth down by 0.5%

The Commerce Department cut its growth rate to 2 percent from the first 2.5 percent estimate of a month ago, surprising many economists who had expected the revision to be unchanged.

“Growth during the summer was more sluggish than initially thought as the GDP numbers were revised downward,” said Joel Naroff, an economic analyst. “But the details were not that bad.”

Underpinning the slower growth rate for the July-September period was a contraction in overall business investment, which shrank at an annual pace of 0.1 percent, due to the inventory rundown.

The other key weight on growth was tighter spending by authorities at all levels. At the state and local level spending continued to contract as authorities strained to balance budgets.

The 2-percent pace of growth was still strong enough to quell fears that the world's largest economy had fallen back to recession after a near-stall in the first half, when the growth rate was lower than one percent.

And economists said that the need for businesses to restock could give a solid boost to fourth quarter growth.

The first revision of the GDP data — another revision will come in one month — also confirmed some of the strengths seen earlier.

Personal consumption grew at an annual pace of 1.6 percent, compared to just 0.5 percent in the second quarter, when fears mounted of the country returning to recession as consumers shut their wallets.

And businesses' fixed investments — those into equipment and facilities — picked up to a 1.5 percent rate, the fastest pace since the second quarter of 2010 when the country was emerging from its deepest recession in some eight decades.

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