The US economy grew faster than first thought in third quarter on strong business investment, even as the housing sector posted its biggest decline in more than 15 years, the government said today.
After-tax corporate profits during the quarter were far stronger than expected, and will likely reinforce expectations that Federal Reserve policy-makers would keep interest rates unchanged for the next few months.
Gross domestic product, which measures total economic activity within U.S. borders, expanded at a 2.2 per cent annual rate during the third quarter, higher than the 1.6 percent gain first estimated and above Wall Street expectations for a 1.8 percent gain.
US Treasury debt prices turned lower after the release of the higher-than-expected third quarter GDP reading.
The third quarter gain was still weaker than the 2.6 per cent advance in the second quarter. Even so, business spending was stronger than first thought according to the Commerce Department report, which was the second estimate of the third quarter figures after an initial report issued last month.
Business spending rose at a 10 per cent annual rate, up from the 8.6 per cent rise first estimated. Corporate profits during the quarter, after taxes, advanced by 4.6 percent.
That was far above the scant 0.3 per cent advance in the second quarter and surprisingly higher than the 0.4 percent gain economists in a Reuters poll were expecting.
It was the biggest decline since a 21.7 per cent slide in the first quarter of 1991. Adding more evidence to a weakened housing market, applications for US home mortgages fell last week, pulled down by a shortened holiday week and namely by a decline in mortgage refinancing, according to separate data released today by the Mortgage Bankers Association.