WASHINGTON, UNITED STATES (Reuters) - The United States economy grew faster than initially thought in the third quarter, notching its best performance in two years, buoyed by strong consumer spending and a surge in soybean exports.
Gross domestic product increased at a 3.2 percent annual rate instead of the previously reported 2.9 percent pace, the Commerce Department said in its second GDP estimate on Tuesday.
Growth was the strongest since the third quarter of 2014 and followed the second quarter's anemic 1.4 percent pace.
Growth was also lifted by upward revisions to business investment in structures and home building, underscoring the economy's solid fundamentals that further bolster the case for the Federal Reserve to raise interest rates next month.
Data ranging from housing to retail sales and manufacturing suggest the economy retained its momentum early in the fourth quarter even as exports appear to be faltering against the backdrop of renewed dollar strength and a fading soybean boost.
Economists polled by Reuters had expected that third-quarter GDP growth would be revised up to a 3.0 percent rate.
The third-quarter revision also showed a much more favorable growth profile for the economy.
The boost from inventories was not as big as previously estimated, which suggests that businesses are not sitting on piles of unwanted goods. This means they will have more scope to place new orders, which augurs well for economic growth in the coming quarters.
The sharp acceleration in GDP in the last quarter should quash any lingering fears that the economy was at risk of stalling after growth averaged just 1.1 percent in the first half.
That together with a labor market that is near full employment and steadily rising inflation could leave the Fed comfortable to hike interest rates at its Dec 13 to 14 policy meeting.
The Commerce Department said consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.8 percent rate in the third quarter and not the 2.1 percent pace reported last month.
Business spending on equipment, however, fell at steeper 4.8 percent rate, instead of the previously reported 2.7 percent pace of contraction. That marked four straight quarters of decline in spending on equipment.
With after tax corporate profits rising at a 7.6 percent pace last quarter there is scope for business investment to rebound. Corporate profits declined at a 1.9 percent rate in the second quarter.
The export growth estimate was little changed at a 10.1 percent rate, the fastest pace since the fourth quarter of 2013. The spike in exports largely reflected a surge in soybean exports after a poor soy harvest in Argentina and Brazil.