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

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

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...

The inventory to sales ratio remains near a record all-time low which bodes well for future production.

— Joseph A. LaVorgna (@Lavorgnanomics) November 25, 2014

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

A smaller trade deficit is one reason why we project current quarter real #GDP growth at 4.2%

— Joseph A. LaVorgna (@Lavorgnanomics) November 25, 2014

—

Follow Zach Noble (@thezachnoble) on Twitter