U.S. Economy Posts Strongest Growth in More Than a Decade

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from The Wall Street Journal,

GDP Grows at 5% Rate, Supported by Consumer Spending, Business Investment.

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.

The agency last month had estimated third-quarter GDP growth at 3.9%. Economists surveyed by The Wall Street Journal had expected a smaller upward revision, to 4.3% growth.

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.

“There is a positive feedback loop going on at the moment,” Mike Jakeman, global analyst for the Economist Intelligence Unit, said in a note. “Job creation is running at the strongest rate for 15 years. More people in work means more income, which means more private spending, which means more business investment, which means more hiring.”

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.

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