Healthy consumer spending propelled the U.S. economy to growth of 5 percent between July and August, the fastest rate of expansion since 2003.
In its final estimate of gross domestic product for the quarter, the U.S. Commerce Department said Tuesday that economic activity expanded at an annualized rate of 5 percent. That was much stronger than the 3.9 percent the agency estimated in its second readout.
Stocks pushed to record highs after the government's latest GDP report, with the Dow Jones industrial average topping 18,000 points for the first time.
The economy grew 4.6 percent in the second quarter. It is the first time in 11 years that GDP has risen at least 4 percent for two straight quarters. Growth has topped 3.5 percent in four of the past five quarters, notes Gus Faucher, a senior economist with PNC Financial Services Group.
The main reason for the robust growth was stronger consumption, which grew 3.2 percent rather than 2.2 percent, as the government originally forecast. Among consumers, spending on health care services rose sharply. Business investment and government spending also rose, while companies added to their inventories.
Jason Furman, President Obama's chief economic adviser, said in a blog post that the economy is benefiting from vigorous job-creation, rising wages and a rebound in consumer confidence.
Paul Dales, a senior economist with Capital Economics, said in a note that the outlook for the economy heading into 2015 looks "rosy," while noting that growth is likely to slow in the fourth quarter.
In one sign of weakening, businesses unexpected slashed their orders for big-ticket items in November. That represents the third decline in durable goods spending in the past four months, notes Jennifer Lee, senior economist with investment bank BMO Capital Markets.
Still, consumer spending accounts for roughly two-thirds of economic growth, and holiday shopping has been solid this year. Most economists forecast fourth-quarter GDP of 2.5 percent to 3 percent.