U.S. Economy Grows 3.5% In 3rd Quarter, Sees Strongest Six Months Of Growth Since 2003

The U.S. economy is humming along, growing by 3.5% this summer according to an advance estimate released by the Bureau of Economic Analysis Thursday.

That first estimate of the country’s gross domestic product (defined by the BEA as “the value of the production of goods and services in the United States, adjusted for price changes”) covers the third quarter, or July through September. It represents a “deceleration” from the second quarter, when GDP grew 4.6%.

But the number was still higher than expected. It also made the second and third quarters the strongest consecutive six months of growth that the U.S. economy has seen since 2003.

“This is the strongest six-month interval we’ve had in 10 years,” Carl Tannenbaum, Northern Trust’s chief economist, told the New York Times . “The pace of the expansion has clearly increased.”

“Since the financial crisis, the U.S. economy has bounced back more strongly than most others around the world, and the recent data highlight that the United States is continuing to lead the global recovery,” said Jason Furman, chairman of President Obama’s Council of Economic Advisors, in a statement.

The report comes a day after the Federal Reserve announced that it was ending its quantitative easing program. The Fed said Wednesday that “there has been a substantial improvement in the outlook for the labor market” and believes that there is “sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.”

“Today’s GDP report is consistent with the Fed’s decision to end QE,” Dana Saporta, economist at Credit Suisse Securities USA, said according to Bloomberg . “It bears out the Fed’s contention that the U.S. recovery is progressing.”

Still, the components that make up the U.S. GDP were not all as strong as the overall number.

“The headline number – 3.5 percent – is awfully good,” Josh Bivens of the Economic Policy Institute told the Washington Post . “But once you start digging into it, there’s not a ton of evidence we’ve actually shifted into a higher gear.”

The BEA attributed the drop in the percent change of GDP to lower private investment, exports, and spending by state and local governments. But those were “partly offset by a downturn in imports and an upturn in federal government spending.”

Indeed, defense spending increased by 16% in the third quarter but can fluctuate widely depending on circumstances and Pentagon needs.

And consumer spending grew at a slower pace than expected despite a dip in unemployment and the price of gas.

But despite those underlying concerns, the market responded favorably on Thursday after the news. The Dow Jones industrial average jumped 221 points to close at 17,195.42.

The BEA is slated to release its second, revised estimate for third quarter GDP growth on November 25. That could provide a clearer picture of where the U.S. economy is headed going into the holiday shopping season.

[photo credit: 401(K) 2013]

U.S. Economy Grows 3.5% In 3rd Quarter, Sees Strongest Six Months Of Growth Since 2003