The US economy had its best quarter in 11 years, according to the Bureau of Economic Analysis in its third and final estimate of gross domestic product. The annualized growth in GDP hit 5.0%, and the Q2 GDP got re-estimated at 4.6% as both consumer and business spending expanded faster than early estimates guessed:

Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 5.0 percent in the third quarter of 2014, according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.6 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 3.9 percent. With the third estimate for the third quarter, both personal consumption expenditures (PCE) and nonresidential fixed investment increased more than previously estimated (see “Revisions” on page 3).

Some of this may be a little overblown. Real personal consumption expenditures (PCEs) went up 3.2% in Q3 and 2.5% in Q2. The Q3 number is good without question, but it’s not 5%. Durable goods sales went up sharply by 9.2% as consumption appeared aimed at catching up to long-delayed consumer choices, but that may be coming down a bit in Q4:

New orders for manufactured durable goods in November decreased $1.7 billion or 0.7 percent to $242.3 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 0.3 percent October increase. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 0.1 percent. Transportation equipment, also down three of the last four months, led the decrease, $0.9 billion or 1.2 percent to $75.5 billion.

Defense spending rose considerably in Q3 too, 16% after a 0.9% increase in Q2. Overall government spending rose 9.9%, while in Q2 it declined by 0.9%. Most of that came from the federal government, as state and local spending only rose 1.1% in Q4.

Still, the other indicators show the economy building long-term strength. A 3.2% growth in PCEs demonstrates considerable consumer confidence, and the business indicators look good too. Nonresidential fixed investment rose 8.9%, investment in equipment rose 11%, and intellectual property rights spending went up 8.8%. Exports went up 4.5% and imports dropped 0.9%, both good signs for the US manufacturing sector. Inventory adjustments only accounted for a minute shift in GDP — a slight decline of 0.03% — as real final sales of domestic product rose 5.0%, the same as overall GDP.

Reuters was duly impressed, while noting that growth has probably cooled off in Q4:

The Commerce Department on Tuesday revised up its estimate of gross domestic product growth to a 5.0 percent annual pace, citing stronger consumer and business spending than it had previously assumed.

It was the fastest growth pace since the third quarter of 2003. The economy was previously reported to have expanded at a 3.9 percent rate. …

But the pace of growth likely slowed in the fourth quarter.

In a second report, the Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, was unchanged after declining 1.9 percent in October.

The continued weakness in the so-called capital goods orders is at odds with industrial production data, which has shown strong momentum in the manufacturing sector.

The euro took a plunge against the dollar today on the news, forcing a momentary stop to trading this morning:

The dollar strengthened across the board and dragged EUR/USD below 1.2200 to fresh 2 ½-year lows after data showed US GDP growth at the strongest pace since Q3 2003. …

EUR/USD broke below 1.2200 and stops were triggered, sending the pair quickly to its lowest level since August 2012 at 1.2182. At time of writing, the pair is trading at 1.2190, recording a 0.32% loss on the day.

So Merry Christmas, and get to Europe while the exchange rates are low. My first visit to Rome in 2011 saw the euro hit $1.50 and it made for a painfully expensive vacation. It hasn’t been often over the last several years where we’ve enjoyed the advantage. Get it while it’s hot.