The U.S. economy grew faster than initially estimated in the third quarter as businesses aggressively boosted inventory, but underlying domestic demand remained sluggish and buoyed the case for the Federal Reserve to keep up its stimulus for now. Gross domestic product (GDP) grew at a 3.6 percent annual rate instead of the 2.8 percent pace reported earlier, the Commerce Department announced this morning. Economists polled by Reuters had expected output would be revised up to only a 3.0 percent rate. The third-quarter growth pace was the fastest since the first quarter of 2012 and quickened from the April-June period’s 2.5 percent rate, even though economists expect slower growth in the final months of the year. Businesses accumulated $116.5 billion worth of inventories, the largest increase since the first quarter of 1998. That rise compared to prior estimates of only $86 billion. Inventories accounted for a massive 1.68 percentage points of the advance made in the July-September quarter, the largest contribution since the fourth quarter of 2011.
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