The economy had a smooth summer.
Gross domestic product, the broadest measure of economic activity, increased 3.5% between July and September over the same period last year, according to the U.S. Commerce Department. It exceeded analysts’ expectations and offered more proof of an economy gaining momentum.
The GDP news comes on the heels of the Federal Reserve’s announcement Wednesday to end its bond-buying stimulus program now that the economy is improving. Economists viewed the Fed’s decision as a mostly positive sign that growth is picking up, even in the job market.
Analysts projected GDP growth to hit 3% this quarter, according to data from FactSet.
Consumer spending is the largest factor for U.S. economic growth, and it rose 1.8% in this quarter, a slight drop from the same time a year ago, but better than the bleak first quarter this year.
2014 had a dicey start. Economic growth dropped 2.1% the first quarter because the extremely cold winter (remember the Polar Vortex) kept many businesses and schools closed for days and people inside their homes. The weather also lowered exports to other countries. The second quarter rebounded well, posting 4.6% growth from the same time a year ago.
What’s next? The IMF forecasts that the U.S. will have 2.2% GDP growth for the year. So far, the nation appears to be on track for that. It’s a lot higher than Europe and other parts of the world that have been hit by geopolitics and slowing growth such as Russia.
The big concern for quarter four is holiday spending. Americans are clearly buying more, but it’s still not a level investors and economists want to see to feel confident that the worst is behind.
Europe’s slowdown could also be a drag for the U.S., although so far the impact has been modest.
“I think Europe by itself poses no real threat to the U.S. recovery or expansion,” said Dr. Robert Shapiro, former Under Secretary of Commerce for Economic Affairs. He is more concerned that a sharp rise in oil prices could hurt the recovery.
