U.S. Economy Grew 3.2 Percent in 3Q, Best in Two Years

The U.S. economy grew faster in the third quarter than initially estimated, expanding at its strongest pace in two years in a rebound from a weak first half of 2016.

Total economic output, also known as gross domestic product, expanded at a 3.2 percent annual pace from July through September, the Commerce Department said Tuesday.

The figure was up from an initial estimate of 2.9 percent and the best performance since the economy expanded at a 5 percent annual rate in the third quarter of 2014.

The Commerce Department will release a final estimate of third quarter growth next month.

The solid growth comes after the economy struggled through the first half of the year, expanding at just a 0.8 percent rate in the first quarter and improving somewhat to a still-lackluster 1.4 percent in the second quarter.

With analysts expecting fourth-quarter growth also to top 3 percent, the economy appears ripe for another interest rate increase by the Federal Reserve to head off a potential jump in inflation.

Fed monetary policymakers have signaled they will nudge up the central bank’s benchmark short term rate at their Dec. 13-14 meeting.

A key reason for the upward revision in third quarter growth was stronger consumer spending.

Personal consumption expenditures increased at a 2.8 percent annual rate compared with an earlier estimate of 2.1 percent.

The new figure was down from an unusually strong 4.3 percent annual pace in the second quarter, but still represented solid growth from a key driver of the economy.

U.S. exports, which have been struggling because of the strong dollar, rebounded to grow at a 10.1 percent annual rate in the third quarter, the best since 2013.

Exports had grown at just a 1.8 percent rate from April through June and had declined in each of the three previous quarters.

Gross private domestic investment increased at a 2.1 percent annual rate in the third quarter, which was lower than the first estimate of 3.1 percent.

Still, it was the first quarterly increase in a year. Private-sector investment declining at a 7.9 percent pace in the second quarter.