U.S. economy finally flexes its muscles

WASHINGTON — Accelerating from a jog to a sprint, the economy surged from July through September at the fastest pace in nearly two decades. Both consumers and businesses helped power the gains — fresh evidence the national rebound is on firmer footing.

The broadest measure of the economy’s performance, gross domestic product, grew at a breakneck 7.2 percent annual rate during those three months, more than double the 3.3 percent rate in the previous quarter, the Commerce Department reported Thursday.

"Consumers were buying everything from cars and clothes to homes, and businesses are seemingly coming out of their cocoon," said Mark Zandi, chief economist at Economy.com.

Economists said that near rock-bottom short-term interest rates, along with President Bush’s third round of tax cuts, induced consumers and businesses to spend and invest more and helped the economy move at a faster clip during the summer. The next challenge is making sure the rebound is self-sustaining, they said.

On Wall Street, concerns about the rebound’s sustainability weighed on investors. The Dow Jones industrials closed up 12.08 points at 9,786.61.

"Job growth is the key to a sustained economic expansion," said Bill Cheney, chief economist at John Hancock. "If people are worried about their jobs, or worse, if they are getting laid off, then consumer spending is at risk."

The nation’s payrolls grew by 57,000 in September — the first increase in eight months. But analysts have said the economy needs to add a lot more jobs than that each month to drive down the 6.1 percent unemployment rate.

The Bush administration contends that as economic growth improves, meaningful job creation will follow. Bush will be counting on that as he faces re-election in 2004.

"The tax relief we passed is working," Bush said, citing the latest GDP showing. "We left more money in the hands of the American people, and the American people are moving this economy forward."

The president cautioned against expecting "economic growth numbers like this every quarter. Yet, by continuing a pro-growth agenda, we will sustain growth and job creation in this country."

He added: "We’re on the right track, but we’ve got work to do."