GDP Growth Revised Up To 2.7 Percent In Third Quarter

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GDP growth was found to have grown by 2.7 percent in the third quarter of 2012, powered by increases in business inventories and federal spending.

After originally suggesting that output had grown by 2 percent over the year, the economy was found to be growing at a substantially faster pace than was originally thought, and the figure was revised to show 2.7 percent for the three months that ended September 30.

GDP Growth Revised Up To 2.7 Percent In Third Quarter

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Although businesses have remained cautious due to sustained and weak overseas growth, as well as fiscal uncertainty throughout the nation, consumer spending in the US has improved at a healthier than expected rate in recent months.

A strengthened housing market in many regions, along with better levels of employment, have gone a long way toward assuaging analyst’s fears that the economy may be slowing down or heading towards stagnation. The Labor Department recently reported that the number of people filing first-time claims for unemployment is down by 23,000. The new figure, seasonally adjusted, stands at 393,000 – slightly higher than analyst’s predictions of 390,000.

The new pace of growth represents a high level of expansion compared to the second quarter, when the economy grew by just 1.3 percent. The most recent estimation of 2.7 percent represents the fastest rate of expansion since the fourth quarter of 2011, when the economy grow at an annual pace of 4.1 percent. It is the government’s second of three estimations – the final figure is due for December 20.

Despite the good news of the better-than-expected annual GDP growth for the country, financial analysts are still worried about the results the current quarter may bring, with some predicting that output will still be positive, though significantly reduced at a growth rate of one percent.

Added to this, the economy is still facing significant issues such as a $600 billion tax increase and looming spending cuts. In order to prevent the country’s vulnerable economy going into meltdown, Congress and the White House will need to agree on a way to tackle the fast approaching fiscal cliff by January 1.

David Kelly, chief global strategist for JPMorgan Chase & Co. (NYSE:JPM) Funds, said: “The economy certainly hasn’t taken off, but it’s nowhere close to a stall.”

“The economy is still underperforming its full potential, but once we get past the ‘fiscal cliff’ uncertainty, we could see stronger growth next year.”

Kelly also cautioned that inventory backlog from the third quarter may help to slow fourth quarter growth: “If you’re building inventory in the third quarter, then you don’t need to build it in the next quarter.”

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