Exports and military spending were big factor in third quarter growth, helping to make up for slowdowns in business inventories. Consumer spending also increased 1.8%, though it was a slowdown from 2.5% in the second quarter, according to the Commerce Department.
The report beat Wall Street's expectations, as analysts had predicted the economy to grow only 3% in the third quarter. But the jolt in government defense spending—which increased a whopping 16% last quarter, compared to 0.9% in the previous one—isn't expected to continue.
"This is a faster-than-average growth rate compared to the first five years of recovery from the Great Recession. However, the economy’s average growth rate of 2% for the first three quarters of 2014 is essentially right in line with previous recovery years—meaning that it is still too early to declare the recovery has reliably shifted into a higher gear," said Josh Bivens of the Economic Policy Institute.
Weekly jobless claims rose slightly to 287,000 for the week of Oct. 25, and the previous week's claims were revised upward by 1,000. But the overall trend is shifting downward.
"Despite these latest increases in claims, the trends in the data continued to drift lower which suggest continued improvement in the labor market; the most recent four-week averages for initial claims (281,000) and continuing claims (2.378,000) were each new lows for the expansion to date," JPMorgan said in a research note.