The revisions were largely due to higher building of inventories and lower imports than originally assumed. Business investment also grew more than first thought, while consumer spending was slightly slower.

Final sales of domestic product increased 2.1%, up from the 1.7% originally reported.

A key measure of core inflation was revised a tenth lower to 2.2%. Year-over-year growth in the core personal consumption expenditure price index was unrevised at 2.4%, well above the Federal Reserve's implied target of 1% to 2%.

The economy has grown 3% in the past year in real terms, just about the rate economists say is the long-term potential. In nominal terms, GDP was at an annual rate of $13.33 trillion in the third quarter.

Economists expected GDP to be revised up to 1.8%, according to a survey conducted by MarketWatch.

The small revisions to GDP probably won't alter the views of the Federal Reserve or private economists about economic growth or inflation.

On Tuesday, Fed chief Ben Bernanke said he believed growth and inflation were moderating just as the Fed had projected. He expressed no urgency to lower interest rates to keep the economy growing, saying an outbreak of inflation, though not likely, remained the greatest risk.

As in the first GDP estimate, consumer spending accounted for most of the economic growth, with business investment also contributing. A third of the growth came from the output of motor vehicles. Residential investment and net imports were a drag on growth.

Excluding motor vehicle output, GDP grew 0.9%.

"Good markets don't give up easily," said Al Goldman, chief market strategist at AG Edwards.

The Dow Jones Industrial Average closed up 14 points at 12,136, rebounding from a morning low of 12,072.

Boeing Co., a Dow component, rose 0.7% after news that German discount airline Air Berlin plc plans to order more than 60 airplanes.

The S&P 500 gained 4 points to 1,386, while the Nasdaq Composite added 6 points to 2,412.

Apple rose 2.5%, helping support the tech-heavy Nasdaq after Monday's slump, after UBS raised its price target on the stock to $108 from $95.

"The reaction to Bernanke was fairly muted," said Michael Malone, trading analyst at Cowen & Co.

"On the one hand, he said inflation is still high and on the other that it has been moderating."

"All in all, nothing new," Malone added.

Trading volume was 1.59 billion shares on the New York Stock Exchange and 1.99 billion on the Nasdaq.

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