3Q economic growth revised down to 2%

The U.S. economy grew more slowly over the summer than the government had earlier estimated because businesses cut back more sharply on restocking of shelves. The Commerce Department reported this morning the economy grew at an annual rate of 2% in the July-September quarter, lower than an initial 2.5% estimate made last month. The government also says after-tax incomes fell by the largest amount in two years, reflecting high unemployment and lower pay raises. The downward revision was largely due to a lower estimate for inventory rebuilding. Economists believe this could lead to stronger growth in the current quarter, if businesses foresee more demand and restock shelves. Business investment in equipment and consumer spending were also lower than initially estimated. Corporate profits, meanwhile, increased in the third quarter. Domestic profits by financial corporations increased $16 billion in the third quarter, in contrast to a decrease of $54.2 billion in the second. Domestic profits of non-financial corporations increased $17.4 billion in the third quarter—significantly lower than the $80.8 billion profits in the second quarter. Economists predict growth will strengthen to around 3% in the October-December quarter. Many raised their estimates after seeing encouraging October reports on retail sales and factory output. Read the full story by The Associated Press here.