Economic Watch: Gross Domestic Product Clocks In at Perky 4.1% Increase

The American economy expanded more in the third quarter of the year than earlier projections, according to the U.S. Commerce Department.

The gross domestic product, which measures the total output of goods and service, increased at an annual rate of 4.1%, compared to the most recent estimate of 3.6% and a second quarter rate of 2.5%.

The performance is the best since the fourth quarter of 2011 and the best since the economic recovery in mid 2009.

“A stronger consumer in the third quarter than previously reported followed by better-than-expected retail sales reports for October and November support the Federal Reserve’s view that the economy is improving modestly from the start of the year,” says Lindsey Plegza, chief economist at the investment firm Sterne Agee. “Of course, inventories still account for two-thirds of the growth in the third quarter, which will subtract from the current quarter.”

Consumer spending increased 2% rather than the earlier reported 1.4% gain, accounting for much of the gain in this third and final look at the quarter. Consumer spending drives nearly 70% of the U.S. economy.

Despite the upbeat news some analysts and economists expect fourth quarter growth to be a bit slower and once the year is out total 2013 GDP growth will be slightly lower than 2012’s performance of 2.8%, due to slow growth the start of this year.

This new report comes in the wake of the Federal Reserve announcing this week that is a cutting back slightly on its economic stimulus program due to evidence the economy is improving.