Business is booming again, the economy is going "gangbusters" and there's no end in sight, as even recession-weary economists are taking heart from yesterday's record high Dow and a revised report showing the biggest quarterly growth in the U.S. in more than a decade.
"This market is on a tear. There's momentum in place that will continue. All good things are happening right now," said Christine Armstrong, a senior vice president at Morgan Stanley in Boston.
"We have kicked and clawed and scratched our way to these record highs," Armstrong said. "We don't have anything that's taking our focus away from what's a good, solid, strengthening economy that looks good in the future as well."
The Dow closed at an all time high of 18,024.17, up 0.36 percent, after the government revised gross domestic product growth in the July-September third quarter to a whopping 5 percent — the largest quarterly gain since the summer of 2003. The GDP was revised upward from 3.9 percent.
"The higher numbers instill greater consumer or business confidence to add some credence to the durability and sustainability of the recovery," said Doug Handler, chief U.S. economist for IHS Global Insight. "It was really gangbusters."
The Standard and Poor's 500 index also posted a record high — its 50th record high this year, according to Armstrong.
The third-quarter growth came on the heels of 4.6 percent growth in the GDP in the April-June second quarter.
"The revisions were reflective of a stronger consumer, and more business investment," said Lindsay Piegza, chief economist of Stern Agee, in a research note. "In a word, wow!"
The Commerce Department yesterday also reported that consumer spending increased 0.6 percent in November, the most in three months, and income rose 0.4 percent, the biggest gain in five months. Consumer spending accounts for 70 percent of the GDP, so that increase is likely to contribute to strong economic growth in the fourth quarter.
"It's pointing to a better fourth quarter than anticipated," said Handler. "November looks like it was a really good month."
Consumer spending has been buoyed in large part by a strengthening job market and plunging gas prices. According to AAA, gas prices have fallen for 88 straight days, the longest stretch on record, and cheaper fuel has acted as an unexpected tax cut for consumers, experts said.
In its research note, IHS said third-quarter GDP did not include a bump from lower gas prices, but Armstrong sees a bright forecast for the economy in the new year.
"It continues to be a good market and we'll probably have another few good years left," she said. "We're going to be seeing these big ups and big downs. It's going to be two or three steps forward, one step back."
Sal Guatieri, senior economist at BMO Capital Markets, said he expects consumer spending to fuel economic growth of 2.6 percent in the current October-December period. Guatieri also foresees solid growth of 3.1 percent next year, which would be the best performance since the economy grew 3.3 percent in 2005.
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