NEW YORK – The U.S. economy grew faster than previously estimated in the third quarter as exports and government spending provided a lift, but that boost is likely to be lost amid slowing global demand and a move towards tighter fiscal policy.
Gross domestic product expanded at a 3.1 percent annual rate, the Commerce Department said in its third estimate on Thursday, up from the 2.7 percent pace reported last month.
The number of Americans filing new claims for unemployment aid rose last week, putting them back at the lower end of their pre-storm range and suggesting job growth remains moderate.
Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 361,000, the Labor Department said on Thursday. The prior week's figure was revised to show 1,000 more applications than previously reported.
Claims have now unwound the Superstorm Sandy surge. They rose as high as 451,000 in the aftermath of the late October storm, which struck the East Coast. Economists polled by Reuters had forecast claims rising to 357,000 last week.
DAVID ADER, HEAD OF GOVERNMNET BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT
"Claims continues to reflect improvement post Sandy and generally the improvement seen in the weeks before that event so somewhat good news on the economy.
GDP rose on better consumption, some at the state and local level, so that's good news. The bad news is investment in equipment and software was revised lower and reflects an ongoing story. Our cautionary note is that the strong impact of inventories and defense in Q3 will extract from Q4."
TOM DI GALOMA, MANAGING DIRECTOR, NAVIGATE ADVISORS LLC, STAMFORD, CONNECTICUT:
"GDP came in surprisingly strong for Q3. This was the first gain in local and state government spending in three years."
TANWEER AKRAM, SENIOR ECONOMIST, GLOBAL RATES, FIXED INCOME, ING INVESTMENT MANAGEMENT, ATLANTA, GEORGIA
"Jobless claims have shown a trend of slow declines as the labor market gradually heals. We see some signs of improvement in the labor market and that's likely to continue as housing gradually recovers and as firms slowly start to hire.
"The pace of hiring is still disappointing with firms concerned about the impact of the fiscal cliff on demand. Our view is that the unemployment rate will remain well above 7 percent through the coming year and well above the Fed's numerical target of 6.5 percent.
"The final reading on Q3 GDP was largely within expectation and the current quarter remains quite soft. Our view is GDP will show moderate expansion of between 2.0 to 2.5 percent."
TOM PORCELLI, CHIEF U.S. ECONOMIST. RBC CAPITAL MARKETS, NEW YORK
"The GDP upward revision was mostly a function of exports. On the face of it this shows consumer spending had a touch more momentum headed into the holiday season, but we are still looking at a modest outcome in the third quarter.
"Having said that, it is important to note that this is very backward looking data and we already have a sense that activity in the fourth quarter started robust, but slowed dramatically. We already know momentum had faded.
"As for jobless claims, there is not much to say because at the end of the day when the dust settles we are about where we were last week. The fact that markets have barely flinched from the data this morning says a lot. The focus is clearly on the fiscal cliff and the end of the year."
ROBERT BRUSCA, CHIEF ECONOMIST, FACT & OPINION ECONOMICS, NEW YORK
JOBLESS CLAIMS: "Looks like that's not too much news here. Things tend to jump around a bit this time of the year."
Q3 GDP REVISION: "We are more interested about things going forward. This doesn't tell us much on that.
Inventory looks like it's a little less out of balance. The investment numbers are clearly good news because there had been such a drop in that category."
TODD SCHOENBERGER, MANAGING PARTNER AT LANDCOLT CAPITAL IN NEW YORK
"It is great to see GDP at 3.1 percent, but how does it translate to jobs growth? We need to see this kind of growth, but jobs are also needed, and on that score the higher claims data wasn't terribly surprising."
GDP graphic -- U.S. third-quarter GDP revised: The U.S. economy grew faster than previously estimated and exports and government spending provided a lift.
FOREX - The euro extended gains versus dollar
BONDS - The Treasuries were steady
(Americas Economics and Markets Desk; +1-646 223-6300)