U.S. economy grew 3.2% in third quarter, best in two years

Reporting from Washington —  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% annual pace from July through September, the Commerce Department said Tuesday.

The figure was up from an initial estimate of 2.9% and was the best performance since the economy expanded at a 5% 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% rate in the first quarter and improving somewhat to a still-lackluster 1.4% in the second quarter.

With analysts expecting fourth-quarter growth also to top 3%, 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% annual rate compared with an earlier estimate of 2.1%.

The new figure was down from unusually strong 4.3% 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% annual rate in the third quarter, the best since 2013.

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

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

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

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