WASHINGTON (MarketWatch) - The U.S. economy expanded at a 3.5% annual pace in the third quarter, as massive government stimulus dragged the economy out of the longest and deepest recession since the 1930s, the Commerce Department estimated Thursday.
Along with improvements in key monthly figures on output and sales, the rise in real gross domestic product means the Great Recession is likely over in a technical sense, even as further job losses occur. A formal call on the end of the recession isn't expected for months.
It was the first increase in real gross domestic product in a year and it was the strongest growth in two years, the government said. Before growing in the June-to-September quarter, the U.S. economy had shrunk for four straight quarters for the first time since the Great Depression.
The 3.5% increase matched estimates of economists surveyed by MarketWatch.
In the past year, the economy has contracted 2.3%. The economy shrank 0.7% annualized in the second quarter and 6.4% in the first quarter. The figures are seasonally adjusted and adjusted for price changes.
Growth was broad-based in the third quarter, with final U.S. sales rising at a 3% annual pace, the fastest in more than three years.
Third-quarter growth was due to higher consumer spending, a slowdown in the reduction of inventories, an increase in residential investments, and robust government spending.
Home building contributed to growth for the first time in nearly four years.
Business investment declined as a small increase in capital spending on equipment and software was overwhelmed by another large drop in investments in structures.
Foreign trade subtracted from growth in the quarter. A big jump in exports was offset by an even larger rise in imports.
Most economists don't expect the economy to grow quite as much in coming quarters, but they aren't forecasting a double-dip recession, either. Most see growth in the 2% to 3% range. The adjustment in inventories could add to growth for several more quarters.
Consumers are still constrained by the loss of jobs, weak wage growth, a lack of credit and the overhang of too much debt taken on over the past 20 years. Business spending is also likely to remain weak, with companies cautious about getting ahead of consumers. Foreign markets could be a source of strength if economies in major trading partners recover and if the dollar continues to weaken.
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In current dollar terms, GDP rose 4.3% to an annual rate of $14.3 trillion.
Final sales, which exclude inventories, increased at a 2.5% annual rate, the most in a year. Final sales within the United States increased at a 3% annual rate, the first increase since late 2007.
Consumer spending rose at a 3.4% annual rate, the biggest gain in more than two years.
