USviewer: Gross domestic product increased at a 2.9 percent annual rate after expanding at a 1.4 percent pace in the second quarter, the Commerce Department said on Friday in its first estimate. That was the strongest growth rate since the third quarter of 2014.
Economists polled by Reuters had forecast GDP rising at a 2.5 percent annual rate in the third quarter.
Despite the moderation in consumer spending, the third-quarter rise in growth could help dispel any lingering fears the economy was at risk of stalling. Over the first half of the year, growth had averaged just 1.1 percent.
Though the Federal Reserve is mostly focused on employment and inflation, signs of economic strength would be supportive of an interest rate hike in December. The U.S. central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade.
Consumer spending still supported the economy in the third quarter, even as the pace slowed from the second quarter's robust 4.3 percent rate. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.1 percent rate.
A surge in soybean exports helped to shrink the trade deficit in the third quarter. Exports increased at a 10 percent rate, the biggest rise since the fourth quarter of 2013. As a result, trade contributed 0.83 percentage point to GDP growth after adding a mere 0.18 percentage point in the April-June quarter.
There are concerns that the soybean-driven export growth spurt could reverse in the fourth quarter. Economists, however, also note that exports of capital and consumer goods have been growing strongly in recent months.
Businesses increased spending to restock after running down inventories in the second quarter. Businesses accumulated inventories at a $12.6 billion rate in the last quarter, contributing 0.61 percentage point to GDP growth.
Spending on nonresidential structures, which include oil and gas wells, increased at a 5.4 percent rate in the third quarter, the fastest pace since the second quarter of 2014, after falling at a 2.1 percent pace in the second quarter.
Investment in mining, exploration, shafts and wells fell at a 31.5 percent rate in the third quarter after dropping at a 57.4 percent pace in the second quarter.
Business spending on equipment dropped for a fourth straight quarter, slipping at a 2.7 percent rate. While the pace of decline has been ebbing as oil prices stabilize and the dollar's rally gradually fades, a strong turnaround is unlikely in the near-term.
Heavy machinery maker Caterpillar (CAT.N) this week reported a 49 percent drop in third-quarter profit from a year ago and lowered its full-year revenue outlook for the second time this year. Caterpillar said demand for new heavy machinery had been undercut by an "abundance" of used construction equipment, a "substantial" number of idle locomotives and a "significant" number of idle mining trucks.
Investment in residential construction fell for a second straight quarter, while spending by the government bounced back.