WASHINGTON — GDP data show a larger-than-expected upward revision to 3.6% growth, a 0.8 point advance from the preliminary report. That is about one and a half times more than the average revision.

But the GDP top number masks weaker underlying data as it is mostly from additional inventory building. Inventories now contribute 1.68 points to real growth, twice the initial estimate.

In addition to the reported gains in wholesale and retail trade, the Commerce Department found advances in mining, utilities, and construction inventories based on quarterly revisions to these series.

Final sales are weaker on lower consumption. Real final sales have averaged +2% in the last two periods. Details for Q3 still show a surge in durables buying based primarily on new auto sales, a trend gain in nondurables, and some slowing in services as utilities spending fell.

Also notable is an upward revision to Q3 nonresidential fixed investment stemming from additional imported equipment sales. Residential spending was revised lower.

Weak defense spending and rising State and Local government spending rounded out the report. October's federal government closing probably temporarily depressed this spending in Q4.

Inflation data remained tame, with the GDP price index at +2.0% overall. Core PCE prices were +1.5%.

Wage and salary estimates for Q2 were revised up $22.6 billion, an indication that the consumer had additional ability to spend.

Corporate profits from current production were up $38.3 billion. Profits before tax were up $45.4 billion, and domestic financial and nonfinancial and rest-of-world profits all gained, showing broad strength.

A bottom line from GDP is that any inventory drawn down in Q4 will hurt growth unless falling unemployment claims actually signal a surge in jobs that will boost spending.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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