2017.12.2123:05:00UTC+00US Economy Expands at Quickest Pace in Over 2 Years

The U.S. economy expanded at its quickest pace in over two years in the third quarter, propelled by strong business spending, and is on track for a modest lift in 2018 from tax reductions passed by Congress this week.

Gross domestic product grew at a 3.2 percent annualized rate in the third quarter, according to the Commerce Department's third GDP estimate for the period. Although it was slightly lower from the 3.3 percent reported in November, it was the fastest clip since the first quarter of 2015 and was a pickup from the second quarter's 3.1 percent growth rate.

It also was the first time since 2014 that the economy faced growth of three percent or more for two consecutive quarters.

Retail sales, labor market and housing data as well as other reports have suggested the economy maintained its solid momentum in the fourth quarter.

Separate data showed a jump in the number of Americans filing for jobless benefits last week, the underlying trend in jobless claims remained consistent with a tightening labor market.

Economists are expecting a modest economic boost from the tax changes, which include trimming the corporate income tax rate to 21 percent from 35 percent. Many of them believe the lower tax regime will lead to share buybacks and debt repayment rather than a boost in business investment.

The fiscal stimulus is expected to come when the economy is at full employment, which raises the risk of it overheating.

An alternate measure of growth, gross domestic income, increased at a 2.0 percent rate in the period. GDI was previously reported to have increased at a 2.5 percent rate.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, rose at a 2.6 percent rate in the third quarter instead of the initially posted 2.9 percent.