Economy Heats Up...

Here is an encouraging sign that the economy is headed in the right direction.

The economy grew at a scorching 7.2 percent annual rate in the third quarter in the strongest pace in nearly two decades. Consumers spent with abandon and businesses ramped up investment, compelling new evidence of an economic resurgence.

The increase in gross domestic product, the broadest measure of the economy's performance, in the July-September quarter was more than double the 3.3 percent rate registered in the second quarter, the Commerce Department reported today.

The 7.2 percent pace marked the best showing since the first quarter of 1984. It exceeded analysts' forecasts for a 6 percent growth rate for third-quarter GDP, which measures the value of all goods and services produced within the United States.

In other encouraging economic news from the Labor Department, new claims for unemployment benefits last week dropped by 5,000 to 386,000, a sign that layoffs are slowing. U.S. workers' wages and benefits went up by 1 percent in the third quarter, up slightly from a 0.9 percent increase in the previous quarter.

Amid signs that the recovery is regaining traction, the Federal Reserve on Tuesday decided to hold a key short-term interest rate at a 45-year low of 1 percent. Super-low short-term rates may give consumers and businesses an incentive to spend and invest more, boosting economic growth.

Economists believe the economy will grow at a slower--but still healthy--4 percent rate in the final quarter.

Source: WEFA and Economy.com