WRAPUP 3-US home sales bounce back, 3rd-quarter GDP raised

* Existing home sales rise 5.6 percent in November

* Q3 growth raised to 2.6 percent pace on inventory build

* Gain in consumer spending revised down to 2.4 percent

* Core PCE price index increase smallest on record
(Recasts; adds details, byline; updates markets)

By Lucia Mutikani

WASHINGTON, Dec 22 (BestGrowthStock) – Sales of previously owned
U.S. homes rose in November, offering the latest sign the
economy was ending the year on a more solid footing after a
sluggish third-quarter performance.

The Commerce Department on Wednesday said the economy grew
at an annual rate of 2.6 percent in the third quarter, a touch
above its earlier 2.5 percent estimate, but more of that output
ended up in warehouses.

A separate report from the National Association of Realtors
showed existing home sales rose 5.6 percent in November to a
4.68 million unit annual pace, the highest since June but a
still-depressed level that was slightly weaker than expected.

Economists, who had expected GDP growth to be revised to a
2.8 percent rate, were little fazed and drew comfort from a
range of other recent data from retail sales to trade that
indicated activity has accelerated in the past few months.

Many forecasters expect gross domestic product to expand at
a 3 percent to 3.5 percent pace in the fourth quarter.

“We expect more economic momentum here at year end carrying
over into 2011, obviously housing remains impaired,” said
Robert Dye, senior economist at PNC Financial Services in
Pittsburgh.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Existing home sales graphic: http://r.reuters.com/duf43r

Final GDP third-quarter: http://r.reuters.com/maf43r

Mortgage applications: http://r.reuters.com/gyx33r

For Insider video:

U.S. Commerce Department Acting Deputy Secretary Rebecca

Blank discusses the outlook for U.S. economic growth:

http://link.reuters.com/rew33r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Stocks on Wall Street edged higher, putting the broader
Standard & Poor’s 500 index on track for a fifth-straight
winning session. Prices for U.S. government debt dipped, while
the dollar was flat against a basket of currencies.

TAX PLAN TO SUPPORT GROWTH

The economy, which expanded at an anemic 1.7 percent rate
in the second quarter, is expected to receive support next year
from an $858 billion tax cut deal that led forecasters to raise
2011 growth estimates by as much as a percentage point.

The tax plan is seen complementing the Federal Reserve’s
program to buy $600 billion worth of government bonds to keep
borrowing costs tamped down and shore up the recovery.

A key question hanging over the economy is whether the
level of inventories held by businesses is appropriate given
the pace of sales.

Business inventories increased $121.4 billion in the third
quarter rather than the $111.5 billion estimated previously.
Without the inventory buildup, the economy only expanded at a
0.9 percent pace.

While the stockpiling implies a softer-than-otherwise pace
of growth in the fourth quarter, some businesses may be happy
to add further to inventories given signs of strong sales in
October and November.

The government revised down the third-quarter increase in
consumer spending to a 2.4 percent rate from 2.8 percent, but
all indications are that spending has since picked up.

Consumer spending accounts for more than two-thirds of U.S.
economic activity and the third-quarter pace was the fastest
since the first three months of 2007.

“Consumer confidence has ticked up, retail sales have been
solid and auto sales have improved. Consumers are feeling more
comfortable with keeping pace with the overall economy, not
leading the economy,” said Dye.

HOUSING WEAK, INFLATION LOW

There were also slight downward revisions to government and
business spending estimates, while the trade deficit was a bit
smaller than previously estimated and the contraction in home
building was little changed.

Housing remains the economy’s main weak spot.

A report from the Mortgage Bankers Association showed
mortgage applications last week fell to their lowest level in
nearly a year. For details see [ID:nNLALNE64R]

“We are still in an environment of sluggish demand for
housing. The recent increase in mortgage rates should weigh on
affordability; however, that should be countered somewhat by an
improving economic backdrop,” said Michelle Meyer, a U.S.
economist at Bank of America Merrill Lynch, in New York.

In the GDP report, after-tax corporate profits were revised
down to show a 0.2 percent rise — the weakest reading since
the fourth quarter of 2008 — instead of a 1 percent. That
marked a sharp slowdown from the 3.9 percent gain in the
April-June period.

The report also showed a lack of inflation pressure. The
Fed’s preferred inflation measure, the personal consumption
expenditures price index, excluding food and energy, rose at a
revised annual rate of 0.5 percent. That was the smallest
increase since records began in 1959.
(Additional reporting by Corbett Daly in Washington and Julie
Haviv in New York; Editing by Neil Stempleman)

WRAPUP 3-US home sales bounce back, 3rd-quarter GDP raised