The economy surged to an 8.2 percent annual rate in the third quarter, the fastest pace in nearly two decades and a much stronger performance than originally predicted.

The revised gross domestic product, released by the Commerce Department, was a full percentage point higher than the 7.2 percent growth rate estimated a month ago. The new estimate reflected stronger investment by business on new equipment and software, less severe cuts in companies' inventories and more brisk spending on residential projects.

In the GDP report, the 8.2 percent growth rate - more than double the 3.3 percent pace registered in the second quarter - represented the best showing since the first quarter of 1984, when the economy surged at a 9 percent pace. Economists were predicting third-quarter GDP would be revised up, with estimates ranging from a 7.3 percent pace to an 8 percent pace.

In the GDP report, consumers boosted spending in the third quarter at a 6.4 percent rate. That was up from a 3.8 pace in the second quarter, but down slightly from the 6.6 percent rate previously estimated for the third quarter.

There was an 18.4 percent growth rate in business investment in new equipment and software in the third quarter. That was even stronger than the 15.4 percent pace previously estimated for the quarter and up from a 8.3 percent pace in the second quarter.

Spending on residential projects grew at a 22.7 percent pace in the third quarter, also better than the sizable 20.4 percent growth rate first estimated and up from a 6.6 percent pace in the second quarter.

Fewer cuts to business inventories in the third quarter resulted in a 0.16 percentage-point increase to GDP in that three-month period, compared with a 0.67 percentage-point reduction to GDP as previously estimated.

Another factor in the upward revision to GDP in the third quarter: Slightly stronger spending by state and local governments. These governmental bodies boosted spending at a 2.3 percent pace, up from a 1.3 percent growth rate previously estimated.