Unlike the seventh game of the World Series, the debate over the economy’s strength sometimes seems like a playoff competition between skeptics and believers. But on Thursday, the boosters won at least a temporary victory with a government report that estimated the nation’s economic output rose at a healthy 3.5 percent annual rate in the third quarter.
After an even faster pace of growth in the spring, the higher-than-expected advance in gross domestic product — a measure of all the goods and services produced in the United States — was driven by gains across the board, bolstered by an unusual burst of military spending and a more favorable trade balance.
“This is the strongest six-month interval we’ve had in 10 years,” said Carl R. Tannenbaum, chief economist at the Northern Trust Co. “The pace of the expansion has clearly increased.”
Markets were generally cheered by the latest economic news, which also included an upswing in consumer confidence and further evidence from weekly unemployment claims that the labor market is on the mend. Bond prices barely moved as the Standard & Poor’s 500 index rose 0.62 percent to 1,994.65 and the Dow Jones industrial average increased more than 221 points to close at 17,195.42.
The economy’s performance during July, August and September followed the second quarter’s 4.6 percent annualized growth rate.
“This is a pretty solid set of numbers,” said John Canally, chief economic strategist for LPL Financial. “We’re doing OK here.”
Many forecasters expect the economy to continue to advance at a roughly similar pace, which should help the unemployment rate to keep falling.
“I don’t think it’s going to be hard to maintain a growth of 3 percent for the fourth quarter,” Tannenbaum said.
Any conclusions about the economy’s path, of course, are preliminary. Government statisticians will revise Thursday’s figure twice, first in November and then in December.
In the meantime, skeptics pointed to some troubling signs. “The components may not be as strong as the headline number shows,” said Krishna Memani, chief investment officer at Oppenheimer Funds. The housing sector registered only a 1.8 percent gain, down from last quarter’s 2.5 percent rise. And military spending, which jumped a whopping 16 percent, is notoriously volatile.
Still, for nearly two years, government austerity has been a drag on the economy, and the 10 percent growth in federal spending this quarter reversed that trend, at least for now.