Best GDP growth in more than a decade

Updated

The U.S. experienced the fastest economic growth in more than a decade between July and September 2014, according to revised estimates of real GDP growth released Tuesday. 

“After four years of rocky recovery the U.S. economy is now hitting its stride.”
Real GDP growth in the third quarter was 5.0%, more than a full percentage point higher than previously estimated. It’s the strongest quarter for economic growth since 2003, suggesting that the recovery is gaining momentum after years of steady but sluggish improvement. 

The positive news rallied the stock market to record highs as the Dow Jones broke 18,000 Tuesday morning.

After four years of rocky recovery the U.S. economy is now hitting its stride, with a notable acceleration in growth in recent quarters,” said Gus Faucher, senior economist at PNC Financial Services Services Group. “And growth should remain good next year, with lower gasoline prices a big plus for consumers.”

Stronger consumer spending was responsible for much of the GDP gain, revised upward from 1.0 to 3.2%. Spending on health-care “account[ed] for a big share of the overall consumption revision,” said Michael Feroli, chief economist at JP Morgan Chase, as it was revised upward from 1.9% to 4.6%.

Businesses also made higher capital investments than originally estimated, especially on intellectual property products like software and R&D. They also spent more on accumulating inventory, which suggests faster growth in the fourth quarter as well. 

One significant disappointment was weak spending on durable goods, including aircraft, defense, machinery, computers, and transportation equipment. The numbers suggested a weak fourth quarter as well, and a separate report indicated as much: New orders for durable goods fell 0.7% in November.

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Best GDP growth in more than a decade

Updated