GDP growth revised to 2.6 percent for 3Q, economy stronger than previously thought

The final estimate of third quarter U.S. GDP growth was upwardly revised to an annual rate of 2.6 percent, compared to 2.5 percent from the second estimate and 2.0 percent from the first estimate.

GDP growth soared to 5.0 percent in fourth quarter 2009, decelerated to 3.7 percent in first quarter 2010, and decelerated further to 1.70 percent in second quarter 2010.

While the economy rebounded strongly in the first half of 2010 -- riding the momentum of the inventory adjustment-fueled growth of fourth quarter 2009 -- growth slowed in the third quarter and many economists and policy makers became concerned about the economy.

Deflation was a worry and a major reason that the Federal Reserve announced a second round of quantitative easing (QE2); meanwhile, the European sovereign debt crisis cast a dark cloud on global markets.

However, the U.S. economy may not be as bad as some had previously thought. Indeed, the growth rate of 2.6 percent is markedly higher than the first estimate of 2.0 percent. Recently, many economists have upwardly revised their expectations for fourth quarter GDP growth.

Moreover, QE2, combined with Obama's tax deal with the Republicans -- which is essentially a stimulus package -- has brightened the outlook for the first half of 2011.