U.S. third-quarter growth likely to be revised higher on services data

U.S. economic growth was likely stronger in the third quarter than previously reported, according to data on Wednesday that showed spending on services expanding at a brisk clip.

The Commerce Department's quarterly services survey, or QSS, showed services outlays increased much more vigorously than the government had assumed in its second estimate of gross domestic product published in November.

"This increased services spending suggests there is greater traction in the economy than was previously assumed and that despite global growth concerns, domestic demand is exhibiting solid forward momentum," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Economists said the data suggested third-quarter consumer spending could be raised by at least two-tenths of a percentage point from a 2.2 percent annual rate when the government publishes its third estimate later this month.

That combined with data on wholesale inventories and construction spending could see third-quarter GDP revised up to at least a 4.6 percent annual pace from the 3.9 percent rate reported last month.

"This upward revision implies slightly stronger momentum for services consumption heading into the fourth quarter, but is of little significance to our forecast for fourth-quarter GDP growth," said Daniel Silver, an economist at JPMorgan in New York.

Fourth-quarter growth estimates are currently converging around a 2.5 percent pace.

The QSS, which provides a comprehensive count of service sector revenues, is frequently a source of GDP revisions. It showed broad-based increases in services spending during the third quarter, with big gains in healthcare, legal and software.

According to economists, the QSS data showed the government had underestimated healthcare spending by about $3.8 billion.

With the introduction of President Barack Obama's signature healthcare restructuring law at the start of this year, healthcare spending has been particularly tough to estimate.

Growth estimates could shift again on Thursday, with the release of business inventory data for October, especially if September's figures are revised.