Evidence is mounting that the U.S. economy is kicking into high gear.

Gross domestic product soared 5% on an annual basis in the third quarter, the government said on Tuesday.

To put that in perspective, it's the strongest quarter of growth since 2003.

"Other than the first quarter's weather-induced contraction, there's no doubt the economy has been great this year," said Dan Greenhaus, chief global strategist at BTIG.

Investors cheered the news, sending the stock market to record highs with the Dow crossing 18,000 for the first time ever.

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Growth came across the board with business investment, consumer spending, housing, exports and government spending all showing signs of strength.

Feeling more confident, consumers ramped up their spending to a healthy pace of 3.2%, compared with previous estimates for 2.2%. With gas prices remaining low, many expect that trend to continue through the holidays.

"Consumer spending north of 3% is pretty darn good these days," said Greenhaus.

Defense spending was also a huge driver in the third quarter, surging 16%.

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U.S. economic strength: This is the third and final reading on GDP, and the 5% figure represents an upgrade from the Commerce Department's initial estimate of 3.9% growth.

The stellar third quarter also marks an acceleration from the very strong growth of 4.6% during the second quarter and the rough first quarter when GDP was -2.1% due to the harsh winter weather.

All of that helps explain why hiring has increased dramatically this year. Employers added 321,000 jobs in November, making 2014 the strongest year for job growth since 1999.

The solid growth could clear the path for the Federal Reserve to increase interest rates in 2015. While there is some trepidation about the first interest rate hike in nearly a decade, it would signal that the U.S. economy in actually strong enough to take off the training wheels.

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The American public appears to be taking notice of the flurry of positive economic headlines.

For the first time in seven years, more than half of Americans think the economy is in good shape, according to a new CNN/ORC poll released on Tuesday. That marks a big improvement from October when just 38% of Americans said economic conditions were somewhat or very good.

But don't bet on another quarter of 5% growth to wrap up 2014. New data released on Tuesday showed that orders of big-ticket items unexpected declined in November, suggesting businesses are hitting the brakes on investment.