GDP for Q3 Revised Upward; Existing Home Sales Rise but Still Weak

The third-quarter's performance marks an improvement from the feeble 1.7% growth logged in the April-June quarter. The economy's growth slowed sharply then. Fears about the European debt crisis roiled Wall Street and prompted businesses to limit their spending.

"It sure looks like the 'soft patch' is over," said Nariman Behravesh, chief economist at IHS Global Insight.

In the third quarter, greater spending by businesses on replenishing their stocks was the main factor behind the slight upward revision to GDP.

Consumers boosted their spending at a 2.4% pace. That was down from a 2.8% growth rate previously estimated. Even so, consumers increased their spending at the fastest pace in four years. The slight downward revision reflected less spending on health care and financial services than previously estimated.

More recent reports from retailers, however, show that shoppers are spending at a greater rate in the final months of the year.

Companies are discounting merchandise to lure shoppers. A price gauge tied to the GDP report showed that prices — excluding food and energy — rose at a 0.5% pace in the third quarter, the slowest quarterly pace on records going back to 1959.

Americans have more reasons to be confident. Stock prices are rising, helping Americans regain vast losses in wealth suffered during the recession. Job insecurity remains a problem, but the hiring market is slowly improving. And loans aren't as difficult to obtain for those with solid credit histories.

Even with the improvements, though, consumers are showing some restraint. In the past, lavish spending by consumers propelled the economy to grow at a rapid pace. After the 1981-1982 recession, the economy expanded at a 9.3% clip. Consumers increased their spending at an 8.2% pace.

Consumers have yet to display that level of confidence in the economy. While hiring is improving, employers still aren't adding enough jobs to lower the unemployment rate.

Even with stronger economic growth anticipated for next year, analysts predict it will still take until near the end of this decade to drop unemployment back down to a more normal 5.5% to 6% level.

The government's estimate of GDP in the July-September quarter was its third and final one. The government makes a total of three estimates for any given quarter. Each new reading is based on more complete information. GDP measures the value of all goods and services — from machinery to manicures — produced within the United States.