Real GDP growth for the third quarter was revised up again, the ""Bureau of Economic Analysis"":http://bea.gov/newsreleases/national/gdp/2012/pdf/gdp3q12_3rd.pdf reported Thursday, reaching a 3.1 percent annualized growth rate. It was only the third time in the last five years the quarterly growth rate topped 3.0 percent.[IMAGE]
Economists had forecast a 2.8 percent growth.
In the same report, BEA said corporate profits in the third quarter rose $45.7 billion in the third quarter, more than double the $21.8 billion increase in the second quarter. The profit surge was driven by the financial sector which saw an improvement of $68.1 billion in the third quarter while non-financial industries experienced a drop of $14.1 billion. Stronger profits in the financial sector though could provide new lending opportunities. Corporate profits had fallen $53 billion in the first quarter with the financial sector showing a drop of $12.3 billion.
The report on GDP was the third of three monthly reports tracking the broadest measure of the nation's economic health. GDP growth of 3.0 percent is considered ""trend"" with above-trend growth suggesting favorable conditions for hiring.
The economy grew at 1.3 percent in the second quarter and 2.0 percent in the first.
The revisions to the GDP components were mixed. Consumption, business fixed investment, net exports, exports, and government purchases were revised slightly higher while residential investment, inventory investment, and imports were revised slightly lower.[COLUMN_BREAK]
Comparisons with previous reports showed a wide range of improvement from the second quarter. Personal consumption spending rose 1.6 percent from the second quarter, slightly higher than the 1.5 percent gain in the second quarter.
Residential fixed investment was up 13.5 percent compared with an increase of 8.5 percent in the second quarter, and government spending was up 9.5 percent after falling 0.2 percent in the second quarter.
The contribution of government spending to the GDP growth complicates budget negotiations to address concerns about the ""fiscal cliff,"" underscoring the importance of government spending to the overall economy.
The GDP Price Index was unchanged at 2.7 percent --1.6 percent above its year ago level.
Inflation, as calculated by BEA from personal consumption expenditures, was 1.6 percent in the third quarter compared with 0.7 percent in the second quarter. Core inflation Ã¢â‚¬" excluding food and energy prices, was 1.1 percent in the third quarter, down from 1.6 percent in the second.
The third quarter GDP report paints an economic picture of restrained consumption and fixed investment, and with weakness in business fixed investment. The surprisingly strong headline growth rate reflected two important--but perhaps temporary--reversals in the downtrends for the rate of inventory accumulation and government purchases.
Inventory accounting is one of the trickiest parts of GDP with increases in inventory sometimes showing up as a reduction in the overall picture. Challenges to government spending could reverse that aspect of GDP. The increase in government spending was the first since Q2 2010.
Overall, in dollar terms, GDP grew $104.0 billion in the third quarter, higher than the previous estimates of 89.6 billion growth. Consumer spending contributed $37.6 billion, up from $33.4 billion in the previous report. Residential fixed investment added $11.4 billion, down from the previously reported $12.2 billion quarter-quarter growth, but up from the $7.2 billion residential fixed investment added to GDP in the second quarter.
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