Economy Grows at Rate of Over 4 Percent in Wake of Strong Consumer Spending

 The U.S. economy grew at an annual rate of 4.1 percent from July through September, much higher than initially anticipated. The improved rate comes largely thanks to stronger consumer spending (especially in health care) and is the fastest expansion rate in two years. During the second quarter, the economy grew at an annual rate of 2.5 percent, and it is predicted that current-quarter growth will slow to between 2 and 2.5 percent.

Analysts predict that GDP will have only expanded by around 1.7 percent for the year, down from 2.8 percent in 2012. This is mostly the fault of depressed consumer spending caused by the higher taxes emplaced in January coupled with federal spending cuts. It is estimated that these two factors stole about 1.5 percent from growth in 2013.

That governmental drag is expected to decrease in 2014 with current estimates putting that year’s growth at 2.5 percent. Meanwhile, steady hiring has improved the unemployment rate and November data has been favorable. Retail consumer spending has risen at the highest rate in five months and factory output has increased for four consecutive months. Houses have also been constructed at a five-year high while auto sales are at post-recession highs.

In response to the stronger economic outlook, the Federal Reserve has begun to wind down its bond-buying program, which currently sits at $85 billion in bond purchases per month. January spending will be reduced by $10 billion and will continue to be trimmed if the economy continues to improve.