(MENAFN - Saudi Press Agency) The U.S. economy grew faster than initially estimated in the third quarter, the government reported Thursday, but the momentum is unlikely to be sustained as the country prepares for deep cuts in government spending and tax increases in January.
The Commerce Department said gross domestic product (GDP) expanded at a 2.7 percent annual rate as faster inventory building and export growth offset weak consumer spending and the first decline in business investment in more than a year.
While the growth rate was much higher than the 2.0 percent rate the government reported last month and also was the best performance since the fourth quarter of 2011, it revealed weakness in the economy.
The gain from inventory restocking likely will not be repeated in the fourth quarter, and consumer spending remains weak. Economists say growth already is being limited by fears of austerity, known as the fiscal cliff, which could remove 600 billion from the economy and fuel a new recession.
In the third quarter, business inventories added 0.77 percentage point to GDP growth. Excluding inventories, GDP rose at a 1.9 percent rate, highlighting weak demand. Export growth outpaced the rise in imports, and trade contributed 0.14 percentage point to GDP growth, instead of subtracting 0.18 percentage point as previously reported.
Consumer spending, which accounts for about 70 percent of U.S. economic activity, was lowered to a 1.4 percent growth rate-the slowest since the second quarter of 2011-from the 2 percent gain previously reported.
Business spending was revised to show much deeper declines, which have been blamed on the fears of a tightening fiscal policy next year. Business investment fell at a 2.2 percent rate, rather than the 1.3 percent drop initially reported. It was the first decline since the first quarter of 2011.