The U.S. economy grew at a solid annual rate of 3.5 percent in the third quarter, propelled by significant gains in business investments, exports and military spending.
The third quarter result followed a 4.6 percent rebound in the second quarter, the U.S. Commerce Department reported. The economy shrank at a 2.1 percent rate in the first three months of the year due to a harsh winter.
Analysts believe the economy is maintaining momentum in the fourth quarter, with a huge dip in gasoline prices expected to bolster consumer spending. Many economists say the economy is poised to achieve consistently stronger growth for the rest of this year and all of 2015.
“U.S. economic activity is strong. While some investors fret that falling oil prices could dent the energy boom, lower pump prices will be a stronger tailwind for households,” Jack Ablin, chief investment officer of BMO Private Bank, told BizTimes this morning.
“The economy does appear to be accelerating of late,” said Dan Greenhaus, an analyst with investment firm BTIG, told The Associated Press. He added that the GDP report showed an economy “on a sounder footing today than at any time over the last few years.”
Many economists think full-year growth for 2015 will hit 3 percent, giving the economy the best annual performance since 2005, two years before the Great Recession began.
For the third quarter, consumer spending grew at a 1.8 percent annual rate. Consumer spending contributed 1.2 percentage points to growth in the third quarter. Another major contribution came from an 11-percent rise in export sales, far outpacing imports, which fell at a 1.7 rate.
Federal defense spending shot up at a 16 percent rate, the fastest advance since a 17.4 percent gain in the second quarter of 2009.
Business spending on equipment grew at a 7.2 percent rate in the third quarter, and residential construction grew 1.8 percent.
Much of the optimism for the economy going forward stems from the strength of job growth, which has lowered the national unemployment rate to a six-year low of 5.9 percent. In September, the economy added 248,000 jobs.
The additional workers should translate into more income and consumer spending, which accounts for 70 percent of economic activity.
The Federal Reserve decided Wednesday to end its quantitative easing stimulus program after six years of pumping money into the U.S. economy via asset purchases to shore up growth. Over the past six years, the Fed has pumped more than $3 trillion into the economy through bond purchases designed to keep long-term rates low.
Today’s GDP report prompted the Dow Jones Industrial Average to climb another 140 points today. The blue chip indicators now comfortably back above the 17,000 mark. The largest local gainers this morning were Wisconsin Energy Corp. (up $1.04 to $49.33) and Strattec Security Corp. (up 88 cents to $103.50).
