WASHINGTON - The U.S. economy grew at a solid 4.1 percent annual rate from July through September, the fastest pace since late 2011 and significantly higher than previously thought. Much of the upward revision came from stronger consumer spending.
The Commerce Department's final look at growth in the summer was up from a previous estimate of 3.6 percent. Four-fifths of the revision in the report released Friday came from stronger consumer spending, mainly in the area of health care.
The 4.1 percent annual growth rate in the third quarter, as measured by the gross domestic product, came after the economy had expanded at a 2.5 percent rate in the second quarter. Much of the acceleration reflected a buildup in business stockpiles.
On Friday, President Barack Obama pointed to the upward revision to GDP growth as one of several signs of improvement in the economy. They include four straight months of solid job growth and a drop in the unemployment rate to its lowest point in five years.
"What it adds up to is we head into next year with an economy that's stronger than it was when we started the year," Obama said at a White House news conference. "I firmly believe that 2014 can be a breakthrough year for America."
The GDP report also gave a boost to Wall Street. The Dow Jones industrial average was up about 80 points in late afternoon trading.
Economists still expect growth to slow a bit in the current October-December quarter. In part, that's because two-fifths of the third-quarter gain in GDP came from a buildup in business stockpiles. That gain isn't likely to be repeated in the fourth quarter. Many analysts think growth will slow to an annual rate between 2.5 percent and 3 percent this quarter before picking up next year.
The third-quarter increase in GDP -the economy's total output of goods and services - was the best performance since a 4.9 percent increase in the final three months of 2011.
Still, analysts expect that for the year, the GDP will expand only around 1.7 percent, down from the 2.8 percent growth of 2012. Much of that drop-off occurred because consumer spending was depressed by higher taxes that took effect last January and the government's across-the-board spending cuts. The Congressional Budget Office has estimated those two factors shaved 1.5 percentage points from growth in 2013.
But the drag from the government is expected to lessen in 2014. Many analysts are looking for growth to hit 2.5 percent or better in 2014.