The Economy

Q3 GDP Better Than First Estimated

Business spending on equipment and investment in home construction helped boost third-quarter GDP growth.
Katie Kuehner-HebertNovember 24, 2015
Q3 GDP Better Than First Estimated

The U.S. gross domestic product in the third quarter grew better than initially thought, which could bolster the case for the Federal Reserve to finally start raising interest rates next month.

GDP grew at a 2.1% percent annual pace, instead of the 1.5% rate initially reported, the Commerce Department said Tuesday. With the second estimate for the third quarter, the decrease in private inventory investment was smaller than previously estimated.

Moreover, upwardly revised business spending on equipment and investment in home building also boosted third-quarter GDP growth. However, growth in consumer spending was revised downward, to 3% from 3.2%.

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Real gross domestic income — the value of the costs incurred and the incomes earned in the production of goods and services in the nation’s economy — increased 3.1% in the third quarter, compared with the revised 2.2% increase in the second quarter.

The GDP revision was in line with economists’ expectations, according to CNBC/Reuters.

“The third-quarter’s respectable expansion should set up the economy to achieve at least 2% growth in the second half of the year, around its long-run potential,” CNBC/Reuters wrote. “In the wake of robust job growth in October and strong domestic demand, the Fed is expected to raise rates at its Dec. 15-16 policy meeting.”

The Commerce Department also reported that corporate profits after tax fell at a 1.6% rate in the third quarter after rising at a 2.6% pace in the second quarter. Profits, which have been undercut by the dollar’s strength and lower oil prices, were down 8.1% from a year ago, the biggest decline since the fourth quarter of 2008.

The GDP estimate released on Tuesday is based on more complete source data than were available for the “advance” estimate issued last month.