U.S. economy posts strongest growth in more than a decade
The U.S. economy posted its strongest growth in more than a decade 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 5.0% 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.
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 upgraded estimates for fixed nonresidential investment, a proxy for business spending, and personal spending, especially on services like health care.
Economic output in the third quarter climbed 2.7% from a year earlier, up only slightly from 2.6% annual growth in the second quarter.
The Commerce Department on Tuesday 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 Commerce Department will release its first estimate of GDP in the fourth quarter, which ends next week, on Jan. 30.
In the third quarter, Tuesday’s report showed, consumer spending rose at a seasonally adjusted annual rate of 3.2%, up from an earlier estimate of 2.2%. Spending on goods and services contributed 2.21 percentage points to the quarter’s growth rate of 5%, up from an earlier estimated contribution of 1.51 percentage points.
Household spending on services climbed at a 2.5% pace, revised up from 1.2%. Health-care outlays alone contributed 0.52 percentage point to the quarter’s GDP growth.
Business spending also was revised higher. Fixed nonresidential investment in structures rose at a 4.8% pace in the third quarter, revised up from 1.1% growth, and spending on intellectual property products climbed 8.8% versus an earlier estimate of 6.4% growth. Investment in new equipment rose at a 11% pace, revised upward slightly from 10.7%.
Overall, fixed nonresidential investment contributed 1.1 percentage points to the quarterly growth rate, up from an earlier estimate of 0.88 percentage point.
Residential investment was revised higher, and private inventories were revised to show a smaller drag on growth than initially estimated. Government spending was revised higher, too.