Wow! U.S. economy revved up

Wow! U.S. economy revved up
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POSTED: Friday, December 20, 2013 - 10:00am

UPDATED: Friday, December 20, 2013 - 10:04am

Wow!

The U.S. economy suddenly looks a lot perkier in the third quarter than originally thought, according to revised data released by the government on Friday.

Gross domestic product -- the broadest measure of economic activity -- grew at a 4.1% annual pace in the third quarter, up from the 2.8% pace that was originally reported in November.

The government typically reports its GDP figures at least three times, and Friday's report is the final number for the third quarter.

Larger increases in consumer spending as well as business investments in commercial real estate, industrial equipment and intellectual property like software were some of the main reasons why GDP was revised higher.

This is encouraging news, especially after economists had largely written off the previous GDP revision for the third quarter because much of the growth came from businesses building up their inventories.

When businesses stockpile goods, it can be a mixed signal.

It could be a sign that companies expect demand will pick up in the future -- so they are stocking their shelves in advance.

Or, it could be an indication that demand is weaker than expected, and goods are lingering on the shelves longer than planned as a result.

Friday's report showed that larger inventories still contributed to growth, but positive signs also came from other parts of the economy.

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