The U.S. economy posted its strongest growth in 11 years
during the third quarter, supported by robust consumer spending and business
investment. Gross domestic product, the broadest measure of goods and services
produced across the economy, grew at a seasonally adjusted annual rate of 5% in
the third quarter, the Commerce Department said Tuesday. That was up from
the second quarter’s growth rate of 4.6% and the strongest pace since
the third quarter of 2003, when GDP grew at a 6.9% pace.
Tuesday’s report showed stronger-than-expected spending by
U.S. consumers, particularly on services like health care. Fixed nonresidential
investment also was revised up, signaling more spending by businesses on new
buildings and research and development. The jump in growth was less dramatic on
an annual basis. Economic output in the third quarter climbed 2.7% from a year
earlier, up from 2.6% growth in the second quarter.
U.S. stocks rose sharply after the report was released
Tuesday morning, with the Dow industrials topping 18,000 for the first
time. The Commerce Department also revised upward its estimate of corporate
profits last quarter. Corporate profits after tax, without inventory valuation
and capital consumption adjustments, rose 2.8% from the second quarter, versus
an earlier estimate of 1.7% growth. Profits last quarter rose 5.1% from a year
earlier.
The U.S. economy has experienced robust growth since the
spring, recovering from the first quarter’s unexpected—but fleeting—GDP
contraction. The nation has seen its best year of hiring since 1999. Those
signs of strength stand in contrast to worries about a slowdown in other
parts of the world, including China, Japan and members of the eurozone.
Still, the weak first quarter will weigh on full-year growth
in the U.S., and many economists expect somewhat slower growth in the fourth
quarter. Federal Reserve policy makers expect GDP growth of 2.3% to 2.4% in
2014, and a pickup next year to growth of 2.6% to 3%, according to
projections released last week.
The third quarter saw consumer spending rise at a seasonally
adjusted annual rate of 3.2%, according to Tuesday’s report, up from an earlier
estimate of 2.2% and topping 2.5% growth during the second quarter. The biggest
upward revision came in household spending on services, which climbed at a 2.5%
pace last quarter versus an earlier estimate of 1.2% growth. Health-care
outlays alone contributed 0.52 percentage point to the quarter’s GDP growth. The
new figures relied on newly available revenue estimates for service-providing
firms.
Business spending, as measured by fixed nonresidential
investment, also was revised higher. Spending on structures rose at a 4.8% pace
in the third quarter, revised up from 1.1% growth. Spending on software,
research and development and other intellectual property products climbed 8.8%
versus an earlier estimate of 6.4% growth. Investment in new equipment rose at
an 11% pace, revised upward slightly from 10.7%.
Final sales of domestic product, a version of GDP that
strips out inventory changes, also grew at a 5% pace in the third quarter.
Final sales to domestic purchases, which includes imports but strips out
inventories and exports, rose at a 4.1% rate.
Click
here to access the full article on The Wall Street Journal.