America’s economy roared forward at its fastest pace in 11 years during the third quarter – a holiday package of good news that sent US stocks to new highs and provided fresh evidence of solid growth momentum.
The nation’s gross domestic product (GDP) grew at a 5 percent annualized pace during the July-to-September stretch, the Commerce Department reported.
Separately, the agency said that in November, the level of personal income rose by 0.4 percent from the previous month, faster than in recent months. Personal spending by consumers rose even faster, a hint of rising confidence as the holiday retail season launched.
GDP numbers haven’t been at 5 percent or higher since the third quarter of 2003. Although such strong figures weren’t unusual for hot quarters during the late 1990s, it’s unusual in for the slower-growth era of the new millennium.
Tuesday’s report revised prior GDP estimates upward by more than forecasters had expected, and propelled a strong start for the US stock market. The Dow Jones Industrial Average rose above the 18000 mark for the first time, and the Standard & Poor’s 500 stock index also hit a new record trading level, Reuters reported.
All this raises an obvious question: After years of struggle, how good is the current economy getting?
Forecasters warn against extrapolating eye-popping numbers as the new normal, but there’s plenty to celebrate. The US economy appears to be nearing a point at which Americans might begin to view it positively.
The good news: Growth appears solidly on track – not at a 5 percent pace in 2015 but possibly at a respectable 3 percent, many economists say. Consumer confidence has been trending upward, and Americans are feeling better about the job market. Wages showed some pickup in November, according to Tuesday’s other Commerce Department report. And falling oil prices have given drivers a gas-pump dividend.
The official unemployment rate has fallen below 6 percent of the work force, and is projected to keep declining in 2015. And the jobless rate is expected to drop to 5.4 percent by the end of next year, according to a National Association for Business Economics survey of forecasters, conducted prior to the GDP report.
But GDP growth will be only about 2.9 percent for the 2015 calendar year, according to the average forecast in the same survey. Maybe the economy will throw some positive surprises on that prediction. But the global economy also has some challenges that could make big gains hard to come by: weak growth in Europe and Japan, the prospect of Federal Reserve interest-rate hikes as the US economy strengthens, and the potential for simmering conflicts in the Middle East or Ukraine to roil financial markets.
Lower oil prices meanwhile, have hammered commodity-oriented emerging economies, even as they help global consumers in general.
“The world as a whole will benefit from an extended period of lower oil prices,” writes Julian Jessop, chief global economist at Capital Economics in London, in an outlook report for 2015.
If the US economy has improved, there’s still a ways to go before Americans widely feel a sense of financial security and promise. Polls find many Americans worry that younger generations won’t have a higher standard of living than their parents.
And although a Gallup survey of economic confidence finds the gauge higher than at almost any time in the past seven years, the index level shows a reading that’s more negative than positive.
Still, the latest news shows economic indicators moving in a positive direction.