The economy grew at the fastest pace in over two years in the third quarter, as consumers and government stepped up their spending and exports surged.
Gross domestic product expanded at a 3.2% annual rate in the Commerce Department’s second reading, released Tuesday. That’s the strongest pace since the second quarter of 2014. It beat the consensus estimate of a 3.1% growth rate among economists surveyed by MarketWatch.
Consumer spending rose 2.8% in the quarter, stronger than the original estimate of 2.1% and the strongest pace since 2002. Another big contribution to the economy was business investment in structures like offices and factories, which expanded at a 10.1% pace, faster than the initial estimate of a 5.4% clip.
Corporate profits soared 6.6% in the third quarter, a much better performance than the 0.6% decline in the second.
Residential investment, which has run at a much weaker pace than economists expected based on other economic indicators, like housing starts, contracted 4.4% in the second revision. That’s better than the 6.2% decline initially reported.
Exports were marked up slightly, to a 10.1% gain from 10.0%, largely thanks to a surge in soybean exports. Exports of goods are at the strongest in three years. Imports, which detract from overall GDP growth, were marked down slightly, to a 2.1% gain from 2.3%.
Given the quirks involved in GDP calculations, some economists prefer to track gross domestic income. That measure was up 5.2% in the third quarter, the government said.
A measure of core inflation, which excludes volatile categories like food and energy, rose 1.7% during the quarter, unrevised from the initial reading. That’s inching closer to the Federal Reserve’s 2% target.
Most economists and investors expect the central bank to raise the benchmark interest rate at its December meeting as inflation firms and economic growth remains sturdy.
The benchmark 10-year Treasury note yield has moved up sharply in recent weeks in anticipation of stronger federal government spending and economic growth.