The second revision to U.S. GDP growth in the third quarter was the charm.
The U.S. economy grew at a 3.2% annualized rate in the the three months that ended in September, according to the Commerce Department. That was ahead of the 2.9% growth reported in the initial estimate and above the 3% growth rate that economists surveyed by Bloomberg were expecting.
The higher than expected growth came from revisions to consumer spending. Household purchases, which account for almost 70% of economic activity, were up at an 2.8% annualized rate in this revision, up from 2.1% in the last set of figures for the third quarter.
The numbers looked good for consumers to be able to keep up that pace for a while. Wages and salaries rose $110.2 billion in the quarter, up from an initial estimate of a $94.6 billion gain.
Corporate spending remained a drag on the economy as it has for much of this recovery. Corporate spending on equipment, for example, fell at a 4.8% annualized rate. That was worse than the 2.7% drop in the initial estimate for the quarter.
There is hope, though, even on this front. Corporate before-tax earnings for the quarter climbed by 6.6% after falling by 0.6% in the second quarter. Profits were up by 2.8% year-over-year. That’s the first year-over-year gain in corporate profits after five quarters of decline.
The U.S. economy has really only one last hurdle to jump before the December Reserve’s December 14 meeting. Tomorrow we’ll get the personal consumption expenditures index for October. The PCE Price Index is the Fed’s preferred measure for inflation. The PCE Price Index was up at a 1.2% year-overhear rate in September with the core PCE Price Index, which excludes energy and food prices, up 1.7% year-over-year in September. The Fed’s target inflation rate is 2% currently.
The October PCE Index will be the last inflation report before the December 14 meeting of the Fed’s Open Market Committee that will decide whether or not to raise interest rates for the first time in 2016.