The economy picked up speed in the summer, growing at a brisk 3.9 per cent pace, the fastest in 1 1/2 years and an impressive performance even as a credit crunch plunged the housing market deeper into turmoil.
The latest snapshot of the country's economic health, released by the Commerce Department on Wednesday, suggested that the economy is demonstrating much resilience and thus far holding up well to the strains in the housing and credit markets, which had intensified during the third quarter and rocked Wall Street.
Individuals ratcheted up their spending. US businesses sold more goods abroad and boosted some investment at home. Those were some of the main factors helping to push up overall economic activity in the July-to-September quarter.
The third quarter's growth rate was up slightly from a 3.8 per cent pace logged in the second quarter. It marked the strongest showing since the first quarter of last year.
The increase in third quarter gross domestic product exceeded analysts' forecasts for a 3.1 per cent growth rate for the period. Gross domestic product is the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.
The strong performance came despite the worsening housing slump.
Builders slashed investment in housing projects by 20.1 per cent, on an annualized basis, in the third quarter, the largest drop in a year. That was even deeper than the 11.8 per cent annualized cut made in the second quarter and provided stark evidence of the problems in the housing market.
The new figures on the economy come as the Federal Reserve meets for a second day Wednesday to weigh whether it needs to lower a key interest rate to protect the economy down the road from the ill effects of the ailing housing market.
Wall Street investors are betting on a smaller, one-quarter percentage point cut. That would follow up on a bolder half-percentage point reduction ordered in September, the first rate cut in more than four years.
The ill effects of the housing slump and credit crunch, however, didn't deter consumers.