NEW YORK (TheStreet) -- The pleasant surprise from Tuesday morning's report on third-quarter economic growth was not that one big thing is much better than economists expected -- instead, a lot of things are just a little bit better. The news sets the scene for a stronger holiday shopping season than last year, according to most forecasts, but most economists don't expect overall fourth-quarter growth to be as rapid as it was for the last six months.
The Commerce Department now says the economy grew at a 3.9% annual rate between July and September, up from the 3.5% initially estimated last month. That was better than the 3.3% growth economists had expected.
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Given the 4.6% growth in the second quarter, the U.S. has been growing at a healthy 4.25% rate since emerging from last winter's polar vortex. At least it looks that way now; the final revision of third-quarter numbers will be released next month.
The two most closely-watched components of the economy both grew faster than previously estimated, according to the new report. Consumer spending, which makes up about 70% of the economy, grew at a 2.2% rate rather than 1.8%. It may not sound like much, but that's about 22% difference in the rate of growth. Investment in housing rose 2.7% rather than 1.8%, though it slowed noticeably from the second quarter's pace. Non-residential fixed investment grew 7.1% rather than 5.7%.
The offset that kept the revision from being even more positive was that exports grew at just a 4.9% annual rate, significantly less than the initial 7.8% estimate.
"All in all, this is a solid report," Regions Financial chief economist Richard Moody said. "The underlying rate of growth has improved, and the better business investment numbers are most encouraging.
"[This] marks three out of the past four quarters with double-digit growth in investment in equipment and software," Moody said. "To me this is the most underappreciated aspect of growth over the past few quarters. I expected an upgrade to consumer spending, but not nearly to the extent we got."
The other big improvement in the numbers was a smaller-than-first-reported slowdown in the pace at which businesses built inventories. In the initial report, inventories subtracted almost 0.6 percentage points from the rate of growth, which was revised to only a 0.1 percentage point reduction today.