The numbers: The U.S. expanded at an annual 3.2% annual rate in the third quarter, a more robust pace of growth than previously reported, new government figures show.
The increase in gross domestic product, the official scorecard for the economy, initially was reported at 2.6% and updated to 2.9% last month.
A bigger increase in consumer spending, mostly on services such as travel and recreation, accounted for the stronger GDP print in the third quarter.
The latest revision paints a picture of an economy expanding at steady a slower pace compared to last year, but not on the cusp of recession.
The economy is also forecast to expand again in the final three months of the year, with estimates ranging from 1% to 3%. All figures are adjusted for inflation.
Key details: The main engine of the economy, consumer spending, increased at a solid 2.3% annual clip in the third quarter, the government said. Previously the increase was reported at 1.7%.
The largest contribution to growth in the third quarter, however, came from a steep drop in the trade deficit. Smaller deficits add to GDP.
Other segments of the economy were notably weaker. Business investment fell, for instance, with the housing market especially hard hit as higher mortgage rates took a toll.
Corporate profits were not as weak in the third quarter as initially reported, however. Adjusted pretax earnings were flat instead of down 1.1%.
Most other figures in the report were little changed. GDP is updated twice after the initial results are published. This was the second update.
GDP had shrunk in the first two quarters of the year, but mainly due to technical reasons based on how the report is composed instead of any underlying weakness in the economy.
Big picture: The economy is still growing as the year winds down, but 2023 is likely to prove more challenging.
The Federal Reserve is primed to raise interest rates to the highest level in at least 15 years in an effort to tame severe inflation, but it risks slowing the economy so much that it could tip into recession.
Looking ahead: “Despite a rapid increase in interest rates, the economy is growing and importantly, households are still spending,” said chief economist Rubeela Farooqi of High Frequency Economics, but “in 2023 we expect a slower growth trajectory.”
Market Reaction: The Dow Jones Industrial Average
and S&P 500
were set to open lower in Thursday trades.