Yet 3.6% increase driven by inventory buildup that’s not expected to last  WASHINGTON (MarketWatch) — The U.S. economy expanded by a 3.6% annual pace in the third quarter to mark the fastest increase in a year and a half, but the revised gain was fueled by a huge buildup in inventories that’s likely to prove temporary. This was the largest increase in inventories since 1998, and such large increases are usually followed by slower inventory growth in the following quarter. Most economists expect a slowdown in the final three months of 2013 that would drag GDP below 2%. Already, some retail analysts say companies failed to sell as many goods during the kickoff to the holiday season as they expected. If that’s the case, companies might have to cut prices to drum sales and accept lower profit margins. The 3.6% annualized growth rate is the fastest since the first quarter of 2012. Economists polled by MarketWatch had expected gross domestic product to be revised up to 3.2% from an initial reading of 2.8%. Consumer spending, the main engine of the U.S. economy, was trimmed to a 1.4% increase from 1.5%, the Commerce Department reported Thursday. Also, final sales of U.S.-produced goods and services was cut to 1.9% from an original estimate of 2.0%. The growth in inventories was revised up to $116.5 billion from a preliminary estimate of $86 billion. That’s the biggest increase since the first quarter of 1998, with inventory stockpiling accounted for almost the entire upward revision in GDP. Business investment in equipment was also revised up to show no change instead of a 3.7% drop. Export growth, meanwhile, was reduced to 3.7% from 4.5% and imports were revised up to 2.7% from 1.9%. Most of the other figures in the updated GDP report were little changed.

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