U.S. Economy Grew At Fastest Rate Since 2011

The economy expanded at a rate of 4.1%, according to data released Friday by the Commerce Department. Consumer spending was higher than expected.

Commerce Department / Via bea.gov

The economy is growing faster than it has in almost two years, according to newly revised data on growth in the third quarter released today by the Commerce Department.

The economy expanded at a rate of 4.1% thanks to higher than initially reported spending by individuals, investment by businesses, homebuilding, and spending state and local governments. The previous estimate was 3.6%. The growth rate in the second quarter was 2.5%.

This is the highest quarterly growth rate since the fourth quarter of 2011, when growth was 4.9%.

This number, while surprising on the upside, is broadly consistent with more positive signs in the economy, especially the latest unemployment and job creation figures, which showed the unemployment rate down to 7% and 203,000 jobs created in November

One worry about sustaining this high rate is how much of it was made up businesses building up inventories that would then be sold down later and not necessarily replenished at the same rate. Inventories were responsible for 1.67 percentage points of the growth number, or $115 billion, and only .41 percentage points of the second quarter, or $57 billion.

But the figure that reflects GDP growth besides inventory buildup was up to 2.5%, higher than the second quarter 2.1% and the highest since the beginning of 2012.

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