The American economy grew at the fastest pace in almost two years in the third quarter. Business investment was stronger than previously estimated, too.
The revisions meant the economy grew at a 4.1 percent annual rate instead of the 3.6 percent pace reported earlier this month, the Commerce Department said in its third quarter estimate on Friday.
Consumer spending rose two percent revised upward from 1.4 percent, spending more on gasoline and health care. Business investment in software was revised up sharply to a 5.8 percent increase from an earlier figure of 1.7 percent.
This is an another strong suggestion that the recovery is accelerating; anything above four percent growth is a decent rate of expansion. The question now is whether or not this rate of growth can be sustained once the Federal Reserve begins tapering its stimulus measures in January.
Stocks rose on the news, suggesting greater investor confidence.
The key here appears to be that households have finally finished deleveraging. Household credit is now growing again for the first time since the 2008 crisis:
[Federal Reserve Bank of St. Louis]
Every dollar a household spends paying down debt is a dollar not spent on consumption or productive investment. When household debt grows faster than income for a sustained period — as happened during the boom before 2008 — a period of defaults, repossessions, and deleveraging is inevitable.
The data suggests that that period is now over. This means that the stronger growth we are beginning to see may be sustainable.
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Watch out, China — America is working on dogfighting drones
- How to be the most productive person in your office — and still get home by 5:30 p.m.
- 43 TV shows to watch in 2014
- How liberals are unwittingly paving the way for the legalization of adult incest
- Why the Chinese military is only a paper dragon
- The troubling persistence of eugenicist thought in modern America
- How the Simpsons/Family Guy crossover revealed the worst of both shows
- Libertarianism's terrible, horrible, no good, very bad idea
- Why America won't have enough money to battle ISIS
- 6 things the happiest families all have in common
Subscribe to the Week