The U.S. economy posted its strongest growth in 11 years during the third quarter, supported by robust consumer spending and business investment.
Gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 5% in the third quarter, the Commerce Department said. That was up from the second quarter’s growth rate of 4.6% and the strongest pace since the third quarter of 2003, when GDP grew at a 6.9% pace.
The agency last month had estimated third-quarter GDP growth at 3.9%. Economists surveyed by The Wall Street Journal had expected a smaller upward revision, to 4.3% growth.
Last week’s report showed stronger-than-expected spending by U.S. consumers, particularly on services like health care. Fixed nonresidential investment also was revised up, signaling more spending by businesses on new buildings and research and development.
“There is a positive feedback loop going on at the moment,” Mike Jakeman, global analyst for the Economist Intelligence Unit, said in a note. “Job creation is running at the strongest rate for 15 years. More people in work means more income, which means more private spending, which means more business investment, which means more hiring.”
The jump in growth was less dramatic on an annual basis. Economic output in the third quarter climbed 2.7% from a year earlier, up from 2.6% growth in the second quarter.
U.S. stocks rose sharply after the report was released Tuesday morning, with the Dow industrials topping 18000 for the first time.
Ben Leubsdorf WSJ.com In Oil’s Decline, Bargains
Where most people see falling oil prices as a source of savings, others see investment opportunities. Many advisers and mutual-fund managers are buying shares of midstream energy firms, large exploration-and-production companies and energy-focused master limited partnerships.
Stocks of midstream companies–those involved in the transport and storage of oil and gas products–“have been overdone on the downside,” says Keith Goddard, chief executive of Capital Advisors in Tulsa, Okla. Prices “are attractive enough to give us a good return over three years, ” says Mr. Goddard, whose independent investment firm oversees $1.5 billion.
Treven Ayers, chief investment officer at Clearview Wealth Management in Charlotte, N.C., has also been taking advantage of the downturn, rebalancing client portfolios into the selloff. His firm, which manages $65 million, is finding opportunities in domestic and international stocks as well as energy-focused MLPs and global bonds.
Last month, the firm added to its holdings in Exxon Mobil and Chevron, the nation’s first- and second-largest energy companies, which explore for, produce and refine oil and natural gas.
To be sure, many expect the sector to remain volatile at least for the near term and perhaps longer. Mr. Goddard says the growth of North American oil production will likely slow by the second half of 2015, and that demand will determine when oil prices rise.
Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, says he wouldn’t heavily overweight beaten-down oil stocks now. He says cyclical and consumer-oriented stocks will benefit from falling oil prices as consumers will have more discretionary dollars to spend, and early next year may be a good time to acquire them. If investors want to buy energy companies, they should look for well-known, well-diversified companies with strong balance sheets, he adds.
Daisy Maxey WSJ.com Health Enrollments Rise
Almost 6.4 million people selected a health-care plan on the federal marketplace or were automatically re-enrolled in the first month of the Affordable Care Act’s open-enrollment season this fall, Health and Human Services Secretary Sylvia Mathews Burwell said.
That figure compares with about 5.4 million people who had selected plans using the federal exchange in the original enrollment period of Oct. 1, 2013, through March 31, 2014.
High demand in mid-December helped boost the total, which includes about 1.9 million new consumers buying coverage through the federal exchange, Ms. Burwell told reporters.
She said 4.5 million people who got coverage through the federal site in 2014 were re-enrolled. Of those, more than 30% returned to the site to re-enroll while the rest were re-enrolled automatically, but she didn’t supply actual numbers. The figures don’t include consumers who selected plans through state-based marketplaces.
Sign-ups in the period of Nov. 15 through Dec. 19 indicate that the second enrollment under the ACA, which runs through Feb. 15, is off to “an encouraging start,” Ms. Burwell said.
Stephanie Armour The Wall Street Journal Weakness in Housing
New-home sales fell for the second straight month in November, pointing to underlying weakness in the housing market despite ultralow interest rates and sturdy economic growth.
Sales of new single-family homes dropped 1.6% in November from a month earlier to a seasonally adjusted rate of 438,000, the Commerce Department said. Sales were down by the same rate over the prior 12 months.
New homes are only a 10th of the overall housing market and the data are subject to big revisions. But the report came a day after a major industry group reported that existing-home sales–the bulk of the market–also fell in November, to a six-month low.