Blue skies at last.

WHILE bashing China is fashionable in some circles, the U.S. is doing its best to emulate China-like growth, with real gross domestic product rising 8.2 percent in the third quarter, a percentage point higher than the October estimate.

In the last 30 days, the Commerce Department unearthed more business investment in both equipment and structures, more residential investment (housing), more exports and more inventories.

The revision to GDP was powerful confirmation of Meyer's Law, a little maxim named after former Federal Reserve Gov. Larry Meyer. Meyer's Law, which dates back to the days when Commerce produced a "flash" GDP estimate before the quarter ended, states that if the flash is above/below the consensus, subsequent revisions are likely to be in the same direction.

While third-quarter growth won't be repeated in the fourth quarter, it's instructive to take a look at what history tells us about the predicative power of boom-like quarters. According to Bob Barbera, chief economist at ITG/Hoenig, GDP increases on the order of 8 percent fall basically into two categories.

"Either the lift is a last-gap production jump at the tail end of the cycle, or it represents the onset of boom early in the cycle after a period of recession/middling growth," Barbera says.

Assuming this is a start-of-cycle boom, even though it arrived almost two years after the official end of the 2001 recession, "the good news is that the year that follows an early-cycle boom quarter almost always registers above-trend economic growth," Barbera says.

The one exception was in late 1980/early 1981, when a two-quarter boom was followed by aggressive Fed tightening and another recession, he says.

It's worth recalling that second-quarter growth of 3.3 percent was largely dismissed as a one-time, defense-related outlier. Federal defense spending rose 45.8 percent in the second quarter, contributing 1.7 percentage points to the quarter's growth.

In the third quarter, national defense spending fell and overall government spending contributed 0.3 percentage point to GDP. This, too, will likely be dismissed as a one-shot deal, a response to tax cuts.

Critics of the tax cuts "argued they wouldn't stimulate short-term demand because they were aimed at investment and risk-taking," says Michael Darda, chief economist at MKM Partners. "Now the same critics are arguing that the effects of the tax cuts were only on short-term demand and will wear off over time."

Darda calculates that the most recent tax cut increased the combined after-tax return on capital and labor by 42.percent, which means more of both will be offered, raising potential growth permanently.

Based on the new data, John Ryding, chief market economist at Bear, Steams & Co., estimates that the corporate financing gap, or the difference between internal cash flow and capital expenditures, moved into surplus in the third quarter for only the third time in the last 20 years.

"Since profits as a share of GDP are close to the peak levels seen in the 1990s, and since companies are now in financial surplus, we think the factors restraining growth have largely lifted," Ryding says. "We are increasingly confident real GDP will exceed 4 percent by a significant margin in 2004."