Pace of third-quarter economy better than first estimated

Led by a rise in business investment, the U.S. economy grew at an annual pace of 3.3 percent from July through September, its fastest rate in three years.

The Commerce Department estimated Wednesday that third-quarter growth exceeded the 3 percent annual expansion for the period that it had initially reported last month.

The performance, achieved despite damage from two devastating hurricanes, marked the fastest expansion in gross domestic product—the broadest gauge of economic output—since a 5.2 percent annual spurt in the third quarter of 2014.

The estimated growth for the July-September quarter marked an improvement on 3.1 annual growth in the second quarter and a 1.4 annual pace in the January-March quarter.

"The news on the economy had previously been good, but it just got a little better," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

Baird noted that the holiday shopping season appears to be off to a strong start, "which bodes well for consumer spending to propel the economy to a strong finish to the year."

Before the revised third-quarter numbers came out, the Federal Reserve Bank of Atlanta was forecasting that growth would rise to a 3.4 percent annual pace in the final three months of 2017, which could bring growth for the full year close to 2.8 percent. In 2016, the economy grew just 1.5 percent.

The economy showed resilience last quarter in the face of two hurricanes: Harvey, which hit Texas in late August, and Irma, which battered Florida in September.

The U.S. economy is benefiting from a pickup in global growth, a healthy job market, which supports consumer spending, and a drop in the value of the dollar against other major currencies, which makes U.S. products less expensive in foreign markets.

What you need to know:

— Business investment increased at a strong 7.3 percent annual pace from July through September, the sharpest pickup since the end of 2016.

— Consumer spending, which accounts for about 70 percent of U.S. economic output, grew at an annual pace of 2.3 percent, down from 3.3 percent in the second quarter.

— Government spending and investment rose for the first time in three quarters, led by an uptick in defense spending.

— The Commerce Department's third and final estimate of third-quarter GDP will come out on Dec. 21.

—The Federal Reserve's preferred gauge of inflation, which is included in the GDP report, rose at an annual pace of just 1.5 percent, well below the Fed's 2 percent target.

— The Fed is still widely expected to raise interest rates in December for the third time this year.