The U.S. economy grew faster than expected in the third quarter, backing the decision by the Federal Reserve to reduce stimulus.
Gross domestic product expanded 3.5 percent in the quarter through September, compared with an advance of 4.6 percent in the second quarter, reported the Commerce Department on Thursday. This was the fastest growth since the final six months of 2003.
Growth was mostly driven by government spending and reduced trade deficit, which stimulated consumer spending amidst declining fuel prices and growth in hiring. Fed policy makers acknowledged the gains made in the labor market, which influenced them to phase out the stimulus program and prepare to raise interest rates in 2015.
“The economy is on a firm footing, and if the labor market continues to get better, that’s the primary support to consumer spending,” Brian Jones, a New York-based senior U.S. economist at Societe Generale, told Bloomberg News. “The demand side of the equation was very healthy in the third quarter.”
Meanwhile, U.S. jobless claims grew by 3,000 to 287,000 last week through Oct. 25 as expected, reported the Labor Department. The four-week average, which is much more accurate than weekly figures as it smoothes out volatility, fell to 281,000, the lowest level since May 2000.
The 4.6 percent growth in the second quarter followed a 2.1 percent contraction in the first quarter that was mainly attributed to the extreme winter. Consumer spending, which constitutes nearly 70 percent of the world’s biggest economy, rose 1.8 percent in the third quarter. It had expanded 2.5 percent in the second quarter. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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