Washington, Oct. 30-- The economy roared ahead in the third quarter, growing at its fastest pace in nearly 20 years, fueled by greater consumer and business spending.
Gross-domestic product, a measure of all the goods and services produced in the U.S., rose at a sizzling 7.2% annual rate, more than double the 3.3% rate in the second quarter, the Commerce Department reported Thursday. The economy grew at a 1.4% pace in the first quarter.
The third-quarter growth pace was the fastest since the first quarter of 1984, when the economy grew at a heady 9% pace.
Economists had expected growth of 6.1%, according to a survey by Dow Jones and CNBC.
"The key takeaway from the GDP report is that a sustainable demand-led expansion is taking hold," said Dana Johnson, who heads the research group at Banc One Capital Markets. "Another key point is that there was an enormous increase in productivity last quarter, that drove a strong rise in corporate profits."
Economists had expected consumer spending to surge in the third quarter, boosted by tax cuts that went into effect that quarter. The overall economy is expected to cool down in coming months as the impact of those tax cuts fade. Analysts surveyed in the latest Blue Chip Economic Indicators Poll expect the economy to moderate to a 3.7% pace in the fourth quarter and maintain that pace in the first quarter of 2004.
The GDP report showed a marked pickup in consumer and business spending. Business spending had fallen for most of the past two years and was the main reason the U.S. slipped into recession in 2001.
Consumer spending, which accounts for two-thirds of economic growth, rose at a 6.6% rate, its fastest pace since the first quarter of 1988. That followed a 3.8% rate in the second quarter, and 2% in the first quarter.
Spending on durable goods, which are items meant to last three years or more such as cars, surged 26.9%, after a 24.3% gain in the second quarter. Spending on nondurable goods such as food and clothing rose 7.9%, after a 1.4% increase in the previous quarter.
Business spending, or nonresidential investment, rose 11.1%, its fastest pace since the first quarter of 2000. That gauge rose 7.3% in the second quarter and fell 4.4% in the first quarter. Within that category, spending on computers and equipment surged 15.4%, up sharply from the 8.3% rise in the second quarter.
Federal-government spending cooled to a 1.4% increase, after soaring 25.5% in the second quarter. National defense spending was unchanged after surging 45.8% in the previous quarter.
