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Business

Growth, spending, wages revised up

The U.S. economy grew more than previously calculated in the third quarter, fueled by stronger consumer spending and labor income gains that may stoke demand into 2011, the Commerce Department reported Tuesday.

The revised 2.5 percent increase in gross domestic product compares with a 2 percent estimate last month and a 1.7 percent rise in the second quarter, the government said. Consumer purchases rose at the fastest pace since 2006's fourth quarter.

Employee wages in the six months through September were revised up by about $59 billion, indicating Americans may ramp up their spending in holiday shopping. Along with gains in corporate investment in new equipment, the figures show an evolving expansion led more by demand and less by inventory restocking.

"You have a little firmer final sales - that is the very encouraging part of the report," said Michael Feroli, chief U.S. economist at JPMorgan Chase in New York. "It makes me a little more comfortable with the sustainability of the recovery."

Separate figures from the National Association of Realtors showed the economy has headwinds. Sales of previously owned homes fell 2.2 percent in October as foreclosure moratoriums and a lack of credit disrupted the market. Purchases decreased to a 4.43 million annual rate from 4.53 million in September. Economists had projected a decline to a 4.48 million pace.

Consumer spending increased at a 2.8 percent annual rate in the third quarter, Commerce figures showed, compared with a previously reported 2.6 percent rise, and reflected an increase in purchases of used autos.

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