Economy ending year on a high note

Latest GDP report shows 4 percent growth; analysts cautious about 2005.

By Jeannine Aversa
Associated Press

Washington — The economy headed into the end of the year with good momentum, expanding at an annual rate of 4 percent in the third quarter, a faster clip than previously thought.

The new reading on the gross domestic product, released Wednesday by the Commerce Department, exceeded the previous estimate of a 3.9 percent growth rate for the July-to-September quarter. It marked the best showing since the opening quarter of this year and was up from a 3.3 percent pace in the second quarter.

Gross domestic product measures the value of all goods and services produced within the United States and is the broadest barometer of the country's economic health.

Brisk spending by consumers and businesses helped the economy expand nicely in the third quarter. The slight upward revision to GDP in the third quarter mostly reflected the fact that the trade deficit was less of a drag on the economy than previously forecast.

On Wall Street, the report helped lift the Dow Jones industrials to a new, 3?-year high. The Dow rose 56.46 to close at 10,815.89.

Analysts are hopeful the current October-to-December quarter will log a solid performance, with some estimates anywhere from a 3.5 percent growth rate to as high as a 4.5 percent pace. Still, analysts are closely monitoring holiday sales, which thus far have failed to shine.

For all of 2004, the economy is expected to grow by more than 4 percent, which would mark an improvement from 2003, when GDP rose by 3 percent. However, economists foresee slower — but still healthy-- economic growth for 2005.

The latest snapshot of the economy comes as President Bush lays the groundwork for his second-term economic agenda.

The centerpieces of Bush's economic agenda are overhauling Social Security and the nation's tax system — tall orders from both an economic and political standpoint, analysts say.