US economy expands at 3.6 percent rate on pick-up in inventories

The's nation's economy expanded at a 3.6 percent annual rate, the fastest pace in nearly two years, but most of the growth was driven by inventories.

Inventories contributed nearly half of the figure — 1.68 percent — the biggest increase since 1998, while consumer spending sagged in the July-September period, the Commerce Department reported on Thursday. 

While the gain was better than the 3.1 percent forecast, the stockpiling of inventories may not bode well for fourth-quarter growth if consumers don't pick up their spending, which will force companies to pull back production and will weigh on the figures. 

The initial estimate last month showed the economy grew at a 2.5 percent annual pace.

Gross domestic product was 2.5 percent in the second quarter and 1.1 percent in the January-March period.

Inventories increased at a $116.5 billion annual rate in the third quarter after the initial estimates reported an increase of $86 billion.

Stockpiles were up $56.6 billion in the second quarter.

Consumer spending increased at a 1.4 percent annual rate in the third quarter, the smallest gain since 2009.

Spending is key to the economic recovery because it represents about 70 of activity. 

Economic growth is expected to be around 2 percent in the final three months of the year, and could end up around that level for all of 2013. 

The nation's top business leaders said Wednesday that they are eager to increase their investment and hire more workers but need Congress to clear several fiscal hurdles first. 

The CEOs said they are cautiously optimistic about the economy heading into next year, and made the case that a budget deal could be a catalyst for a more robust expansion. 

In a separate report, the Labor Department said that first-time claims for jobless benefits dropped by 23,000 to 298,000 last week, a sign that businesses are laying off fewer workers.

The government will release November's job numbers, which are expected to range between 175,000 and 200,000, according to estimates.

The final GDP estimate is due out Dec. 20.