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Updated from 8:45 a.m. EST

The government sharply raised its estimate of U.S. gross domestic product growth in the third quarter, saying in its first revision of the data that the economy expanded at a 4% rate in the period, up from the original estimate of 3.1%.

Separate reports on consumer confidence and new home sales were slightly better than forecasts, contributing to a growing belief that the economy has bottomed out and avoided a second recessionary dip.

The GDP number topped economists' estimate of 3.8% growth and included encouraging news on the state of corporate profits. They grew at a rate of 2.1% in the quarter, up from 1.7% in the second quarter and their biggest jump since the second quarter of 2001.

Consumer spending continued to be the main driver of growth, rising at a 4.1% annual pace in the period. While down from the initial 4.2% estimate, the rise is still the largest since the fourth quarter of 2001. Spending on durable goods such as cars and trucks jumped 23.1%.

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In the second quarter, GDP rose at a 1.3% rate.

Tuesday's data also included a downward revision in the report's main gauge of prices, the PCE Price Index, which showed an increase of 1.7% compared with the initial estimate of 1.9%. The real final sales component was upwardly revised to 3.5% growth from 3.3% growth.

Companies added inventories at a $15.5 billion annual pace in the third quarter compared with the initial estimate of $1.9 billion.

The Conference Board said its index of consumer confidence rose to 84.1 in November from 79.6 the previous month. Economists had been forecasting a reading of 85.0 as the bounce-back in the stock market had been expected to underpin a mild improvement.

Meanwhile the government said new-home sales fell 4.5% in October, although the annualized rate of 1.007 million also topped the consensus.