Nov. 25 (Bloomberg) -- The U.S. economy grew at an 8.2 percent annual rate
in the third quarter, faster than the government initially estimated as
companies boosted inventories in September to meet the surge in demand.
The nation's gross domestic product, the value of all goods and services
produced, grew from July through September at the fastest pace since the
first three months of 1984, when Ronald Reagan was president. The Commerce
Department previously reported a 7.2 percent third-quarter growth rate,
following a 3.3 percent pace in the second quarter.

``Growth is now super-super strong compared to super strong,'' said Joseph
LaVorgna, senior U.S. economist at Deutsche Bank Securities, whose forecast
of 8.3 percent was the highest in a Bloomberg News survey.

Consumer spending increased at a 6.4 percent annual rate last quarter, the
fastest pace in six years, and retailers such as Williams-Sonoma Inc.
restocked shelves to help satisfy anticipated sales. A measure of profit
widened to a record $739.7 billion, giving companies confidence to increase
spending.

``Inventories declined less than people thought, and there was more
production,'' said Kevin Logan, senior economist at Dresdner Kleinwort
Wasserstein, who forecast 8.1 percent. ``The rebound in corporate profits
will impress people with the idea that business spending will continue to
support the economy for the next quarter or two.''

Fourth-quarter GDP is forecast to expand at a slower annual rate than last
quarter because consumers will have less cash in their pockets from tax cuts
and mortgage refinancing. The first wave of the tax cuts President George W.
Bush won from Congress hit during the quarter.

Forecasts

The median forecasts in the Bloomberg survey of 70 economists was 7.8
percent, with estimates ranging from 6.9 percent to 8.3 percent. Economists
had raised estimates after a report this month showed that inventories
unexpectedly rose in September for the first time in six months.

The benchmark 10-year Treasury note due in November 2013 rose 3/32, pushing
its yield down 1 basis point to 4.22 percent at 9:34 a.m.

Adjusted for inflation, GDP totaled $9.82 trillion at an annual rate.
Unadjusted for the change in prices, the economy grew at a 10 percent annual
rate to $11.06 trillion. Real final sales rose 8 percent, more than the 7.8
percent first estimate.

The pickup in consumer, business and government demand drained inventories
at a slower pace in the quarter than the government had estimated following
the rise in September stockpiles. Inventories contracted at a $14.1 billion
rate, compared with a $35.8 billion drop estimated last month.

Inventories

Inventories added 0.16 to GDP after the revisions, the first addition since
the fourth quarter of 2002. The government had previously estimated a 0.67
percentage point subtraction.

``There was some concern that the building inventories in September could
take away from fourth-quarter growth, but I think we may see companies
building inventory into the fourth quarter,'' said Lou Crandall, chief
economist at Wrightson ICAP LLC, in an interview. Crandall accurately
forecast the 8.2 percent increase.

Williams-Sonoma Inc., owner of the Pottery Barn and Williams- Sonoma retail
chains, was among companies building inventories as it boosted the amount of
merchandise it offers and opened more stores. Chief Executive Officer Edward
Mueller, who took over in January, has bolstered inventory at the Pottery
Barn and Pottery Barn Kids chains, while adding stores and developing West
Elm, a catalog with lower-price furniture.

Construction, Consumers

Residential construction spending rose 22.7 percent, faster than the 20.4
percent growth the government estimated last month. Construction spending
jumped in September to a record as private nonresidential building rose the
most in 11 months and housing demand held close to the record high, a
government report showed earlier this month.

Consumer spending, which accounts for 70 percent of the economy, grew at a
6.4 percent annual pace from July through September, slower than the
government's advance estimate last month of a 6.6 percent increase. A
government report this month showed that retail sales in October declined as
Americans bought fewer automobiles and paid less for gasoline.

Spending on durable goods, including automobiles, rose at a 26.5 percent
rate, in line with last month's estimate. Purchases of non-durable goods
rose at a 7.6 percent rate, initially reported as a 7.9 percent rise.
Services spending increased 2.1 percent.

Corporate Profits

Cost-cutting and increased demand in the third quarter boosted corporate
profits and gave companies confidence to expand and start to resume hiring.

Business fixed investment, which includes spending on commercial
construction as well as equipment and software, rose at a 16.7 percent
annual rate in the third quarter, revised from a 14 percent increase.
Spending on software and equipment rose 18.4 percent.

Earnings after taxes and adjusted for the value of inventories and capital
consumption, a gauge favored by many economists because it shows profits
from current production, rose 11.6 percent to $739.7 billion.

Lafarge North America Inc. Chief Executive Officer Philippe Rollier said
demand for the company's concrete and other construction materials should be
good for the rest of the year. Lafarge North America is a unit of France's
Lafarge SA, the world's largest cement company.

``We should have a better year in 2004, and 2005 should be a great year,''
Rollier said in a televised interview with Bloomberg News.

Inflation Measures

Imports subtracted 0.25 percentage point from growth, compared with the
previous estimated subtraction of 0.4 percentage point. Government outlays
for national defense fell at a 1.6 percent annual rate.

The Federal Reserve has kept its benchmark interest rate at 1 percent, the
lowest since 1958, since June. Fed officials have said they see scant signs
of inflation that might make them raise rates any time soon.

The GDP price deflator, a measure of prices tied to the report, was
unchanged from the previous estimate at a 1.7 percent pace.

The personal consumption expenditures price index, a measure of inflation
watched by Federal Reserve Chairman Alan Greenspan and tied to spending,
rose at a 2.3 percent annual pace, originally reported as a 2.4 percent
increase. Excluding food and energy, the PCE index rose 1.7 percent at an
annual rate.

Gross domestic product will expand at a 4 percent annual rate from October
through December, based on the median forecast of 56 economists surveyed by
Bloomberg News from Oct. 24 to Nov. 3. The Federal Reserve Bank of
Philadelphia said yesterday that its quarterly survey of 34 economists found
that forecasters raised their estimate for the fourth quarter to a 4 percent
growth rate from 3.9 percent in August.

The Philadelphia Fed's survey also projected that the economy will expand
4.3 percent for all of next year, the fastest since 1998. In a separate
survey, the National Association for Business Economics said that its panel
of 28 economists forecast 4.5 percent growth in 2004, the fastest since
1984.