US Economic Growth Smashes Expectations As GDP Grew 5% In Third Quarter

U.S. gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 5 percent in the third quarter, the fastest pace in 11 years, according to the Commerce Department’s third and final estimate Tuesday. The final revision surpassed economists expectations for 4.3 percent annual growth, according to analysts polled by Thomson Reuters.

The upward revision compared with a first estimate of 3.5 percent in October and a second estimate of 3.9 percent last month. GDP increased 4.6 percent in the second quarter, after decreasing 2.1 percent in the first.

"The revision was mainly due to faster consumption growth (3.2 percent versus 2.2 percent)," Paul Dales, senior economist at Capital Economics, said in a note Tuesday. Real personal consumption expenditures increased 3.2 percent in the third quarter, compared with an increase of 2.5 percent in the second.

Dales warned, however, that economic growth won’t be quite as strong in the fourth quarter as it was last quarter. "November’s durable goods orders figures suggest that business investment has slowed significantly, from 11 percent in the third quarter," Dales said. "We still expect fourth-quarter GDP growth to be around 3.0 percent, largely due to another decent rise in consumption."

Following the report, the Dow Jones Industrial Average Futures jumped 52 points, or 0.429 percent, too 17,953.00; the S&P 500 Index Futures gained 5.25 points, or 0.25 percent, to 2,077.75. The Nasdaq Composite Futures added 9 points, or 0.21 percent, to 4,300.75.