Positive GDP Data for Christmas?

The government revises its economic growth measure upward, reflecting more consumer spending.

This holiday season, consider giving gifts that will really pay off.

New data do show that consumer spending is showing a "modest pickup."

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Economic output grew at an annual rate of 3.1 percent in the third quarter, the Commerce Department reported today. That figure is the third and final estimate of last quarter's GDP growth, and it represents a boost from a previously reported 2.7 percent.

A variety of factors contributed to economic growth last quarter, including consumer spending, federal government spending, and residential fixed investment, which includes home purchases and renovations. The department reports that the new estimate does not substantially change the broader portrait of the nation's economy, though new data do show that consumer spending is showing a "modest pickup," while imports, which subtract from GDP, are falling off.

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"In a real sense, I think what this number does is it ratifies the employment reports we've been seeing," says Joel Naroff, president and chief economist at Naroff Economic Advisors. Unemployment was at 8.3 percent in July, but by the end of the quarter in September, it had fallen to 7.8 percent. A growth rate of 3.1 percent is more congruous with that kind of labor market improvement than the Commerce Department's initial estimate of 2.0 percent, says Naroff.

That is all encouraging news to hear about the past few months, but the future is of course uncertain—perhaps more so than usual given the fiscal cliff talks underway in Washington. House Speaker John Boehner and President Barack Obama have been engaged in a back-and-forth of proposals and counter-proposals in recent days, in an attempt to avoid spending cuts and tax hikes that could send the economy into a recession next year.

Even a resolution could mean some economic drag, as even more moderate declines in federal spending and tax hikes than those in the cliff could cut growth. Last week, at the conclusion of the latest Federal Open Market Committee meeting, the Federal Reserve released figures showing that members and bank presidents predict GDP growth of 2.0 to 3.2 percent for 2013. Fed Chair Ben Bernanke said he believed those predictions were made under the assumption that a fiscal cliff deal is struck but that it also hurts growth moderately.

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However, he cautioned that plenty of uncertainty remains, with the fiscal cliff deadline fast-approaching.

"There is a lot of uncertainty right now and if the fiscal cliff situation turns out to be resolved in a way very different from our expectations, I'm sure you would see changes in the forecast," he told reporters at a press conference.

Some, like Naroff, remain more optimistic. He believes that the collective sigh of relief that would accompany the cliff would mean healthy output in 2013, with only a slight dip in GDP growth.

"I'm assuming that some agreement comes up, which means that businesses have a lot of makeup to do. They haven't been investing for the last three [or] four months of the year," he says. "Both hiring and investment should pick up once that's cleared."

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Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. You can follow her on Twitter or reach her at dkurtzleben@usnews.com.