The Economy Grows More Than Expected as Shoppers Keep Spending

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What's Happening Today

You might be sick of spending more money this holiday season.

Between buying some holiday staples like turkey, which costs 17% more on average than it did last year, and spending more on travel, with flight ticket prices up 36%, you might be feeling a little tapped out before we even mention holiday shopping. But those purchases also help keep the economy humming.

Let me explain: Consumer spending accounts for about 70% of the country's gross domestic product (GDP). Economists and market watchers often look to GDP to tell them two things—if the country's economy is growing, and if we are headed into a recession.

When looked at from that point of view, some of the factors that go into play in a recession can be a self-fulfilling prophecy. That's to say, if you stop spending money because you're scared of a recession, it could become more likely that we will tip into a recession.

But in another sign of strength after posting losses in the first and second quarters, GDP growth for the third quarter was revised up to 3.2% today from 2.9% previously. And that revision was much higher than economists expected.

We'll also get another peek into how your spending has impacted the economy and how much more you paid for goods and services in November when the Commerce Department releases numbers for household spending and inflation tomorrow.

- Taylor

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Term of the Day

Real GDP

Real gross domestic product (GDP) is a measurement of economic output that accounts for the effects of inflation or deflation. It provides a more realistic assessment of growth than nominal GDP. Without real GDP, it could seem like a country is producing more when it's only that prices have gone up.

Off the Charts

GDP is an important economic indicator and the ideal GDP growth rate is between 2% and 3%. It hits a peak if it expands beyond that for too long. The bubble bursts at that point, and economic growth stalls.