Consumer and corporate spending boosts US growth

The United States economy expanded in the third quarter at a faster rate than estimated as consumers stepped up spending on services and companies invested more in software.

Gross domestic product grew at a 4.1 per cent annualised rate, the strongest since the last quarter of 2011 and up from a previous estimate of 3.6 per cent, Department of Commerce figures showed yesterday. The median forecast of economists surveyed projected a 3.6 per cent pace after 2.5 per cent in the second quarter.

Inventories accounted for a third of the gain, showing companies were confident about the prospects for demand. Stronger retail sales in October and November underscore the Federal Reserve's view that the world's largest economy is improving.

"You have equity markets supporting household net worth, rising home values and also payroll gains and falling unemployment, so we do really look for consumption to start picking up," said Robert Rosener, associate economist at Credit Agricole CIB. "This is a very good sign for momentum going into the fourth quarter."

Consumer purchases, which accounts for almost 70 per cent of the economy, increased 2 per cent, more than the previously reported 1.4 per cent.

Spending on services contributed 0.32 percentage point, up from a previously reported 0.02 percentage point. In addition to the pick-up in outlays for health care, Americans spent more on recreational services. Outlays for non-durable goods climbed at a 2.9 per cent rate, led by petrol.