GDP report: Economic growth picks up steam

chart_gdp_101123.top.gif By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- The U.S. recovery tugged along at a faster pace in the third quarter than originally reported, driven by stronger exports and spending, the government said Tuesday.

Gross domestic product, the broadest measure of the economy, grew at an annual rate of 2.5% in the three months ending in September, the Commerce Department reported Tuesday. That's a significant improvement over the 2% growth rate first reported for the period.

"We're headed in the right direction, and a good deal of the concern that was evident with the initial release has undoubtedly diminished," said Michael Schenk, senior economist with the Credit Union National Association. "But it doesn't really get us to where we need to be."

The government calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the second reading for the quarter.

While the number is much better than the 1.7% growth reported in the second quarter, the rate is still considered weak for a recovery.

"I think most economists would agree that 2.5% is probably too low for robust job growth. It's about neutral," said Zach Pandl, an economist with Nomura Securities.

Consumer spending increased at a 2.8% pace, the best reading for that measure since the end of 2006, up from 2.6% initially reported. Exports were also revised upward to 6.3%, from 5%.

Those two points mark a bright spot in the report, as consumer spending and U.S. exports are engines of growth needed to drive the recovery forward.

Pandl expects the Fed's latest monetary stimulus plan, referred to as quantitative easing, will help spur stronger growth in the fourth quarter, but still not robust enough to totally diminish the need for the full $600 billion plan.

"This level of growth would still be considered unacceptable from the Fed's perspective," he said. "It's not fast enough to bring inflation back up and lower the unemployment rate. On the other hand, it suggests no reason for alarm."

The reading was slightly better than expected, as economists surveyed by Briefing.com had forecast growth of 2.4% for the third quarter. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,677.90 216.58 1.32%
Nasdaq 4,452.79 69.95 1.60%
S&P 500 1,950.82 23.71 1.23%
Treasuries 2.28 0.05 2.06%
Data as of 6:22am ET
Company Price Change % Change
Apple Inc 104.83 1.84 1.79%
Bank of America Corp... 16.60 0.20 1.22%
AT&T Inc 33.66 -0.84 -2.43%
Microsoft Corp 45.02 0.64 1.44%
Facebook Inc 80.04 1.67 2.13%
Data as of Oct 23

Sections

Buffett's investment firm lost big on Coca-Cola and IBM this week, but that's about the extent of his losses this year. More

Regulators are about to reveal the results of an extensive health check of Europe's top 130 banks, indicating which may need a cash infusion. More

Using technology developed for the military and implemented in Iraq, schools have installed alarm systems that detect gunfire. More

Dressing up in crazy costumes, traveling the world, posing for photos -- and getting paid to do it. Here are journal entries from a day in the life of professional "cosplay" character, Linda Le. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.