US Economy Grows at 3.5 Percent in Q3 2014 for Best Six-Month Run of Recovery

The Bureau of Economic Analysis reported today that US GDP grew at a 3.5 percent annual rate in
the third quarter of 2014. Combined with the strong 4.6 percent showing in Q2, the six-month average of 4.05 percent is the best half-year performance of the recovery. Even including the 2.1 percent annual rate of decrease for Q1, growth over the past full year was better than the average since the recession bottomed out in mid-2009.

Net exports were one of the biggest contributors to growth in the quarter. Net exports, which had been a negative factor in the otherwise strong second quarter, accounted for 1.32 percentage points of growth—more than a third of overall GDP growth for Q3. Export performance remained strong, as it has through most of the recovery, but the big turnaround was in imports. Imports have a negative sign in the national accounts, so the -1.77 percentage points for Q2 reflected an increase in imports for that quarter, while the +.29 percentage points for Q3 indicates a decrease in imports.

Another source of growth in Q3 was a .83 percentage point contribution by the government sector. Most of that was an unusual .69 percentage point growth of national defense consumption expenditure. Defense expenditures tend not to be spread evenly from quarter to quarter. They can account for abrupt jumps in the contribution of the federal government to GDP growth, as they also did in Q4 of 2012 (see the following chart). A recovering state and local government sector again made a positive contribution to GDP growth in Q3, as it has for six of the past seven quarters.>>>Read more

Follow this link to view or download a short slideshow with additional charts based on the latest US GDP release