Economic growth figure revised downward

A decline in inventories is not always a bad sign. Economists believe this could lead to stronger growth in the current quarter, if businesses foresee more demand and restock.

Economists predict growth will strengthen to about 3 percent in the October-December quarter. Many raised their estimates after seeing encouraging October reports on retail sales and factory output.

“While this report is disappointing, it is a look back in time,’’ said Jennifer Lee, senior economist at BMO Capital Markets. “It is encouraging, to say the least, to see the October data coming in stronger.’’

Still, growth could be slowed if consumers continue to earn less. After-tax, inflation-adjusted incomes fell at a 2.1 percent rate. That’s steeper than the 1.7 percent decline initially estimated and is the biggest drop since the third quarter of 2009, just as the recession was ending. It also marked the second straight quarterly decline.

Incomes are primarily wages and salaries, but they include dividend and interest payments and government benefits. While the decline does not directly affect economic growth, income fuels consumer spending, which makes up about 70 percent of economic activity. So if income continues to decline, consumers will probably spend less.

And many Americans could take home even less next year if Congress does not extend a Social Security tax cut and emergency unemployment benefits. Both expire at the end of this year.

“For now, the US economy looks to be moving in the right direction,’’ said Paul Ashworth, chief US economist at Capital Economics. He predicts growth of more than 3 percent in the fourth quarter.

But the January-March quarter “could be a different story, particularly if the payroll tax cut isn’t extended,’’ Ashworth said.