US economy soars, growing at fastest rate since 2003

The U.S. economy grew at a sizzling 5 percent annual rate in the July-September period, the fastest in more than a decade, on the strength of higher consumer spending and business investment.

The resurgence in growth last quarter provided the latest evidence that the U.S. economy is steadily strengthening and outshining most others around the world.

When the U.S. stock market opened for trading, the Dow Jones industrial average traded above 18,000 for the first time. In midmorning trading, the Dow was up 75 points to 18,035.

In its report Tuesday, the Commerce Department sharply revised up its estimate of third-quarter growth from a previous figure of 3.9 percent. Much of the increase came from consumer spending on health care and business spending on structures and computer software.

It was the fastest quarterly growth since the summer of 2003, and it followed a 4.6 percent annual growth rate in the April-June quarter. The government separately reported Tuesday that consumer spending rose at the fastest pace in three months in November, while income posted the best gain in five months. Both were encouraging signs for growth.

Most analysts think the economy is slowing to an annual rate of around 2.5 percent in the current October-December quarter. And they foresee growth around 3 percent in 2015. That would still be the strongest expansion since the economy grew 3.3 percent in 2005, two years before the Great Recession began.

The 2007-2009 downturn, the worst since the 1930s, cost millions of people their jobs. Since then, the economy has struggled to regain full health. Even after the recession officially ended in June 2009, the economy has turned in tepid growth averaging 2.2 percent annually.

But many economists think growth is set to accelerate as more businesses have grown confident about hiring. The country is on track to have its healthiest year for job growth since 1999. In November, employers added 321,000 jobs, the sharpest one-month increase in three years, as the Monitor reported earlier this month:

For perspective, it’s important to note that a year this strong isn’t actually that remarkable. Historically, it’s not unusual in post-recession recoveries to see job gains exceed 3 million.

Over the past four decades, the economy did that in 1977, 1978, 1983, 1984, 1987, 1988 and 1994 and for a three-year streak ending in 1999.

What’s remarkable this time is how long Americans have had to wait. Since the end of the Great Recession in 2009, the US economy hasn’t posted a year above the 3 million mark, even though the deep slump left a massive hole of job losses to be refilled.

But now, America is approaching that kind of number again.

Consumer confidence has been rising this year, and for the first time since the recession began in 2007, more than 30 percent of Americans are saying that now is “a good time to find a quality job,” according to polling by Gallup.

With more people working and having money to spend, solid gains are expected in consumer spending, which accounts for about 70 percent of the economy.

For the third quarter, consumer spending grew at a 3.2 percent rate, the best showing this year and a full percentage point higher than the estimate the government made a month ago. That upward revision was driven by higher spending on health care.

Business investment spending rose at a 7.2 percent annual rate, 2.1 percentage points more than the government's previous estimate. Much of the new strength came from investment in structures and computer software.

The estimate released Tuesday was the government's third and final look at third-quarter growth in the gross domestic product — the value of all goods and services produced in the United States.