US Q3 growth revised up to 3.6%

Gross domestic product grew at a 3.6% annual rate instead of the 2.8% pace reported earlier

The US economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish and buoyed the case for the Federal Reserve to keep up its stimulus for now.

Gross domestic product grew at a 3.6 per cent annual rate instead of the 2.8 per cent pace reported earlier, the Commerce Department said on Thursday.

Economists polled by Reuters had expected output would be revised up to only a 3 per cent rate.

The third-quarter growth pace was the fastest since the first quarter of 2012 and marked an acceleration from the April-June period's 2.5 per cent rate, although economists expect slower growth in the final months of the year.

Businesses accumulated $116.5 billion worth of inventories, the largest increase since the first quarter of 1998. That compared to prior estimates of only $86 billion.

"To the extent that the massive accumulation in inventory may have been involuntary, we are likely to see an unwind in inventory this quarter which will provide some downside risks to fourth-quarter GDP performance," said Millan Mulraine, senior economist at TD Securities in New York.

Inventories accounted for a massive 1.68 percentage points of the advance made in the July-September quarter, the largest contribution since the fourth quarter of 2011.

The contribution from inventories had previously been estimated at 0.8 percentage point. Stripping out inventories, the economy grew at a 1.9 per cent rate.

But a gauge of domestic demand rose at just a 1.8 per cent rate -- probably insufficient to convince the US central bank to trim its bond purchases in December.

The Fed has been buying $85 billion in bonds each month to keep borrowing costs low but officials have said they may start to slow these in coming months.