US economy is growing at fastest rate in a decade — records 5% annual growth rate in Q3

Previous estimate of 3.9% growth is revised up as consumer spending rebounds

The US economy is well and truly back on track, with improved consumer spending pushing last quarter's annual growth rate from 3.9 per cent to 5 per cent — the biggest gain since 2003.

The Commerce Department today revised growth estimates for the three months after July 2014, exceeding the expectations of economists, most of whom forecast growth of closer to 4.3 per cent.

It is thought that a better-than-expected November employment report and the cratering cost of energy will drive Americans to spend even more, although another quarter like this is likely not on the cards.

But, with the American economy in by far better health than its been since the financial crisis, the Federal Reserve is likely to raise interest rates in 2015.

Ethan Harris, co-head of global economics research at Bank of America, said before the report's release: “After five years of weak growth, the economy is finally coming out of rehab.

“Look for the Fed to change policy in a way that only slowly and modestly tightens financial conditions.”

US GDP grew at an average rate of 1.3 per cent in the first half of the year after 2.2 per cent rate in 2013.

Household spending - which makes up around 70 percent of the economy - rose at a 3.2 percent annual pace, up a whole percentage point from previous estimates.

It turns out Americans are spending more on health care, financial services and fun.

The US economy will likely feel the effects of a global slowdown, and fail to keep up this remarkable growth rate, but low gas prices and ever improving employment bode well for the long term.