U.S. GDP grows 3.5 pct.

A smaller trade deficit and a big boost in defense spending spurred growth in the third quarter. The initial read comes just before the elections next week. Fred Katayama reports.

▲ 10:43am EDT - 01:28

The U.S. economy expanded at a brisk pace in the third quarter. Spurring growth at 3.5 percent annual rate: a smaller trade deficit and a big boost in defense spending. Imports plunged despite the stronger dollar, shrinking the trade imbalance. And defense spending grew at its fastest pace in five years. Consumer spending, the biggest contributor to the economy, slowed from the prior quarter, as did business investment and housing. But all three contributed to GDP growth. This third quarter was marked by rising payrolls but slow wage growth, worries over a European slowdown, and volatile swings in the stock market. The pace of economic expansion wasn't as fast as the prior quarter, when the economy sharply rebounded from the first quarter that was slammed by cold weather. Barclays chief U.S. economist Dean Maki said, "Although the GDP figure was stronger than expected, the fact that the surprise was in defense spending, which is unlikely to be repeated, leads us not to extrapolate the stronger growth into future quarters." The report is the first of three reads on third quarter output, but it's important because it's the last economic report card before elections next week. It comes one day after Fed policy officials said they saw "sufficient" strength in the economy. Looking ahead, falling gas prices and rising consumer confidence could help spur consumer spending in the final three months of this year.