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US GDP grew by 3.9% in the 3rd quarter

  1. US GDP increased at a 3.9 percent annual rate in the third quarter of 2014, according to data released this morning by the Commerce Department.
  2. That's more than the initial estimate of 3.5 percent.
  3. This is a slowdown from the 4.6 percent annual rate in the second quarter of 2014, but it's still a strong number.
  4. Inventory investment declined in the third quarter, which means the underlying GDP growth is even stronger than the headline number indicated.

A healthy economy

These past six months have been the strongest six months the American economy has seen in a decade. That arguably says more about the decade than it does about the past six months, but it underscores the reality that the true lean times do seem to be past us. In addition to the fading of the recession, we are likely seeing the benefits of cheap oil for the American economy, which is giving consumers additional buying power for domestically produced goods and services.

An end to austerity

For the second straight quarter, both state and local government and federal government purchases helped the economy to grow. That's how things are supposed to work when interest rates are super-low — government steps in to get things done cheaply and bolster the economy. But throughout 2009 and 2010, the opposite was happening on the state and local level and during 2011, 2012, and 2013 the opposite was happening on the federal level. But the consequences of those fiscal policy fights now seem to be back, and while the government isn't doing any noteworthy stimulus, it's not hampering the rest of the economy either.

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