Economy Expands at 7.2% Rate, Fastest in Almost Two Decades

he U.S. economy expanded at a 7.2% annual rate in the third quarter, the fastest in almost two decades, the Commerce Department reported Thursday.

The increase in gross domestic product, the value of all goods and services produced, was more than double the 3.3% rise in the prior three months and was the largest since the first quarter of 1984.

Excluding the biggest decrease in inventories since the fourth quarter 2001, the economy was even stronger. Real final sales, which exclude the effects of inventory changes, rose at a 7.8% rate, the fastest since the second quarter of 1978.

Consumer spending, which accounts for more than two-thirds of the economy, grew at a 6.6% pace last quarter, the most since the third quarter of 1997. The surge was led by a 26.9% annualized increase in purchases of automobiles and other durable goods.

Business investment in equipment and software rose at a 15.4% annual pace, the fastest since the first quarter of 2000, following an 8.3% gain in the previous three months.

Commerce also said inventory stockpiles fell at a $35.8 billion annual rate, following a $17.6 billion drop in the second quarter, subtracting 0.67 percentage point from growth.

The drop in inventories is expected to help the economy maintain some of its momentum this quarter even as consumer spending is expected to slow, Richard Berner, the chief U.S. economist at Morgan Stanley, told Bloomberg.

Government spending increased at a 1.3% annual rate, slower than the 8.5% pace in the previous three months.

Adjusted for inflation, GDP totaled $9.797 trillion at an annual rate. Unadjusted for the change in prices, it rose to a record $11.038 trillion and rose at a 9% annual rate.

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