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Third-Quarter G.D.P. Rose 3.5%, Lifting Hopes for U.S. Economy

Laurette Eugene at the Point Blank Body Armor factory in Pompano Beach, Fla. The United States economy grew at a better-than-expected rate in the third quarter.Credit...J Pat Carter/Associated Press

Unlike the seventh game of the World Series, the debate over the economy’s strength sometimes seems like a playoff competition that goes on forever between skeptics and believers. But on Thursday, the boosters won at least a temporary victory with a government report that estimated the nation’s economic output rose at a healthy 3.5 percent annual rate in the third quarter.

After an even faster pace of growth in the spring, the higher-than-expected advance in gross domestic product — a measure of all the goods and services produced in the United States — was driven by gains across the board, bolstered by an unusual burst of military spending and a more favorable trade balance.

“This is the strongest six-month interval we’ve had in 10 years,” said Carl R. Tannenbaum, chief economist at the Northern Trust Company. “The pace of the expansion has clearly increased.”

While the G.D.P. report is mostly a look to the past, markets were generally cheered by the latest economic news, which also included an upswing in consumer confidence and further evidence from weekly unemployment claims that the labor market is on the mend. Bond prices barely moved as the Standard & Poor’s 500-stock index rose 0.6 percent to 1,994.65 and the Dow Jones industrial average increased more than 221 points to close at 17,195.42.

The economy’s performance during July, August and September followed the second quarter’s 4.6 percent annualized growth rate. This sustained expansion was welcomed after a bitter winter that contributed to a 2.1 percent decrease for the first three months of the year.

“This is a pretty solid set of numbers,” said John Canally, chief economic strategist for LPL Financial. “We’re doing O.K. here.”

Many forecasters expect the economy to continue to advance at a roughly similar pace, which should help the unemployment rate to keep falling.

“I don’t think it’s going to be hard to maintain a growth of 3 percent for the fourth quarter,” Mr. Tannenbaum said.

Any conclusions about the economy’s path, of course, are preliminary. Government statisticians will revise Thursday’s figure twice, first in November and then in December. Based on experience, the final measure of growth could end up changing as much as a percentage point in either direction, according to Pantheon Macroeconomics.

In the meantime, skeptics pointed to some troubling signs. Consumer spending, though up 1.8 percent, was weaker than some economists had hoped given the recent job growth. They had expected lower- and middle-income families to spend money they saved from falling gas prices and wealthier households to spread around their profits from the stock market.

“The components may not be as strong as the headline number shows,” said Krishna Memani, chief investment officer at Oppenheimer Funds. The housing sector registered only a 1.8 percent gain, down from an 8.8 percent increase last quarter. And military spending, which jumped a whopping 16 percent, is notoriously volatile.

Still, for nearly two years, government austerity has been a drag on the economy, and the 10 percent growth in federal spending this quarter reversed that trend, at least for now.

A greater worry for many economists is how Europe’s anemic growth affects the American economy. They fear that European policy makers and the European Central Bank are not doing enough to stimulate their sluggish economies. The E.C.B.’s announcement on Monday that it was buying 1.7 billion euros’ worth of private assets was dismissed by some economists as too modest an effort given the region’s economic problems.

Doug Handler, chief United States economist at IHS, predicted real growth for all of 2014 to be only 2.2 percent — below the United States’ long-term average growth rate of 3 percent.

And in a speech in Boston this month, Janet L. Yellen, the Federal Reserve Board chairwoman, expressed concern about a decline in the number of new businesses, which are traditionally a vehicle for enterprising Americans to get ahead.

Lurking beneath all the statistics is the concern that the promising numbers are masking profound inequalities and stagnant incomes for most Americans, as Ms. Yellen indicated in her Boston speech.

“It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority,” she said. “I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.”

All in all, though, those who are upbeat about the economy could add several points to their scorecard this week. The Labor Department said on Thursday that new claims for unemployment insurance benefits remained low. The four-week moving average was 281,000, a 14-year low and down from 352,500 a year ago.

And a report from the Conference Board showed that the consumer confidence index reached a seven-year high in October. That positive outlook combined with continued low gas prices could help push up consumer spending during the holiday season.

Steven Blitz, chief economist at ITG Investment Research, saw encouraging signs that the economy was evolving toward more domestic production, even if next quarter’s growth rate falls below 3 percent.

Investment in equipment, although down from its 11.2 percent growth in the second quarter, still posted a 7.2 percent increase. And Mr. Blitz was pleased by the 7.8 percent jump in net exports and the 5.5 percent rise in nonresidential fixed investments.

“That’s a more realistic building block for the economy,” he said, “than to have overleveraged consumers buying homes.”

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: G.D.P. Rises at 3.5% Pace, Lifting Hopes. Order Reprints | Today’s Paper | Subscribe

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