Gross domestic product grew at a 5 percent annual rate from July through September, the biggest advance since the third quarter of 2003 and up from a previously estimated 3.9 percent, revised figures from the Commerce Department showed today in Washington. The median forecast of 75 economists surveyed by Bloomberg projected a 4.3 percent increase in GDP.
Consumer spending is poised to grow in 2015 as stronger employment and lower gasoline prices boost household buying power, one reason why the Federal Reserve will probably raise interest rates next year. Other aspects of GDP — inventories, trade and government spending — are likely to moderate, indicating growth will ease at the end of 2014. And durable goods orders declined last month, another sign last quarter’s surge may not be maintained.
“Consumer spending in particular looks like it’s on a pretty good track right now,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Energy prices are down, labor markets have good momentum, so we’re in pretty good shape heading into 2015.”
Stocks rose after the figures, with the Standard & Poor’s 500 Index advancing 0.2 percent to 2,083.54 at 11:30 a.m. in New York. The yield on 10-year Treasuries was 2.20 percent compared with 2.16 percent late yesterday.
Today’s GDP estimate is the third and final for the quarter and followed a 4.6 percent advance from April through June.
The economy grew at an average pace of 1.3 percent in the first half of the year after expanding at a 2.2 percent rate in all of 2013.
Household purchases, which account for almost 70 percent of the economy, rose at a 3.2 percent annual pace, compared with a previously reported 2.2 percent. The revisions reflected stronger spending on health care, recreation and financial services than previously estimated. Outlays on durable and non- durable goods were also revised up.
Personal consumption added 2.2 percentage points to growth. It rose at a 2.5 percent pace in the prior three-month period.
Business investment was also revised up across the board, with bigger gains reported for spending on construction projects, equipment and intellectual property, which includes software and research and development.