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The Third-Quarter Economic Numbers Are In, and They're Not What Analysts Expected

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Federal government expenditures up 9.9 percent, defense spending up 16 percent...

Image via Nicolas Raymond/flickr

The U.S. economy is beating growth expectations — and it's thanks in large part to the government spending more.

Image via Nicolas Raymond/flickr Image via Nicolas Raymond/flickr

In the third quarter of 2014, the U.S. economy grew at an annualized rate of 3.9 percent, according to revised figures in a Bureau of Economic Analysis report released Tuesday morning.

As Business Insider noted, the initial estimate of third-quarter GDP growth was 3.5 percent, and analysts expected the revision to actually bring that figure down to 3.3 percent.

Instead, it jumped up dramatically — but the forces driving that jump were mixed.

International trade suffered — imports shrank, while exports grew at half the rate they'd grown in the second quarter — and much of the overall GDP boost was fueled by a dramatic rise in government spending, as the BEA reported:

Real federal government consumption expenditures and gross investment increased 9.9 percent in the third quarter, in contrast to a decrease of 0.9 percent in the second. National defense increased 16.0 percent, compared with an increase of 0.9 percent [in the second quarter]. Nondefense increased 0.4 percent, in contrast to a decrease of 3.8 percent. Real state and local government consumption expenditures and gross investment increased 0.8 percent, compared with an increase of 3.4 percent.

Private investment was positive in the third quarter, but down from second quarter numbers in most categories, according to the BEA.

Overall, the figures could bode well for future growth, with Deutsche Bank economist Joe LaVorgna noting the low inventory to sales ratio...

...and the shrinking U.S. trade deficit.

Follow Zach Noble (@thezachnoble) on Twitter

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