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GDP Stunner: 3.5% Growth in Third Quarter

(Updated to provide further detail from the Commerce Department's GDP report, and with closing-day stock prices.)

WASHINGTON ( TheStreet) -- The U.S. gross domestic product grew by a faster-than-expected 3.5% in the third quarter, the best reading in two years and the first time the economy has shown growth in four quarters.

Expansion was expected in the three-month period that ended in September, though analysts had forecast 3.2% growth. In the second quarter, GDP decreased by 0.7%.

Market watchers are sure to interpret the third-quarter number as the clearest signal so far that the worst recession in generations has turned. (Indeed, on the day, the Dow gained 199.89 -- a maddening figure for those who prefer their Dow movements in nice, big round numbers.) The figures released Thursday are "advanced estimates," and could end up being revised down or up in the coming weeks.

Still, on the surface, the number looked promising -- just as the recent third-quarter earnings beats by bellwether companies have appeared promising: from banks like JPMorgan Chase (JPM - Get Report) to industrial behemoths like Caterpillar (CAT - Get Report) to tech stalwarts like Intel (INTC - Get Report).

The last time the economy registered this kind of growth was in the third quarter of 2007, when GDP grew by 3.6%. It has shrunk ever since, a string of contraction not seen since 1947.

Credit the cash-for-clunkers program for a large portion of the GDP increase. Automobile output added 1.6 percentage points to the third-quarter GDP change, the Commerce Department said. In the previous period, autos added 0.19 percentage points.

Juiced by the clunkers program, car demand also helped the country's overall durable goods output spike by 22% in the third quarter, Commerce said. In the previous period, durable goods fell by 5.6%.

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