Instead, consumer spending picked up to a 3 percent annual rate during the third quarter from 1.4 percent in the second quarter, a powerful stimulant since consumers fuel about two-thirds of national economic activity through their purchases of goods and services.
MARKETS SURPRISED
The GDP report was one of several stronger-than-expected readings on the economy Wednesday that sent the dollar up against other major currencies and ignited a rally in stock futures prices. Bond prices fell as investors bet the chances for interest-rate cuts were reduced.
The Labor Department said employment costs -- a key determinant of the costs of production -- rose a smaller-than-expected 0.8 percent in the third quarter, down from 0.9 percent in the second quarter. Cheaper benefit costs accounted for the decline.
And separately, a closely watched report from ADP Employer Services estimated that private employers added 106,000 jobs in October. The private employment service's estimate was well ahead of forecasts among economists surveyed by Reuters for 60,000 jobs and implied the economy had more underlying strength than many had previously thought.
"Certainly the GDP number was much stronger than anticipated and that may lead to some second guessing about what the Fed may do this afternoon, coming on top of that ADP number which was also much stronger than expected," said economist Scott Brown of Raymond James and Associates in St. Petersburg, Florida.
The GDP report showed exports jumped in the third quarter at a 16.2 percent rate. That was more than double the second quarter's 7.5 percent and the strongest increase since the fourth quarter of 2003.