Economy in US grew at fastest pace in 11 years

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The US economy grew at its quickest pace in 11 years in the third quarter, the strongest sign yet that growth has decisively shifted into higher gear.

The Commerce Department yesterday revised up its estimate of gross domestic product growth to a 5.0 per cent annual pace, citing stronger consumer and business spending than it had previously assumed.

It was the fastest growth pace since the third quarter of 2003. The economy was previously reported to have expanded at a 3.9 per cent rate.

GDP growth has now been revised up by 1.5 percentage points since the first estimate was published in October. Big revisions are not unusual as the government does not have full information when it makes its initial estimates.

US stock index futures extended their gains after the report, while US Treasury debt yields rose slightly. The dollar rose to a fresh eight-year high against a basket of currencies.

The economy expanded at a 4.6 per cent rate in the second quarter, meaning it has now experienced the two strongest back-to-back quarters of growth since 2003. Economists polled by Reuters had expected growth would be raised to a 4.3 per cent pace.

But the pace of growth likely slowed in the fourth quarter. In a second report, the Commerce Department said non-defence capital goods orders was unchanged after falling 1.9 per cent in October.