U.S. economy grows 2.5% in third quarter : Economic Report

U.S. growth sharply accelerated in the third quarter as consumers and businesses ramped up spending, a report that shows the economy remained resilient in the face of strong headwinds.
Gross domestic product in the July-through-September period expanded at a 2.5% annual rate, the government said Thursday.
That’s nearly double the 1.3% rate of growth in the second quarter and much faster than the first quarter’s tepid increase of 0.4%.
Economists surveyed by MarketWatch had projected that growth would reach 2.8%.
Although the expansion in GDP didn’t meet market expectations, Wall Street took the data in stride, pointing sharply higher as a result of European leaders’ deal to address the euro zone’s sovereign-debt crisis.
Just a few months ago the U.S. recovery appeared to be screeching to a halt, with some economists warning of a “double-dip” recession.
A tense budget standoff in Washington and Europe’s worsening debt crisis contributed to the darker mood as many indicators of economic activity fell.
Yet while people said they felt worse, according to surveys of consumers and executives, they didn’t let it affect their spending.
In the third quarter, for instance, consumer spending rose 2.4% to mark the biggest increase since the fourth quarter of 2010.
Sales of durable goods such as autos jumped 4.1%.
Consumer spending typically accounts for two-third of U.S. economic growth.
Businesses, for their part, ratcheted up investment by 16.3% to the highest level in more than a year. Purchases of software and equipment surged 17.4%.
Exports also turned in another solid performance, rising 4.0% compared to 3.6% in the second quarter. Domestic manufacturers have led the U.S. recovery since the end of the 2007-2009 recession in large part by boosting exports.
U.S. growth would have been even faster if imports, which subtract from GDP, hadn’t increased sharply: Imports rose 1.9% from 1.4% in the second quarter.
Excluding imports, final sales of goods and services purchased in the U.S. jumped 3.6% in the three months through September.
Inflation, meanwhile, fell after a big runup in the first half of the year.
The price index for domestic purchases fell to 2.0% in the third quarter from 3.3% in the second quarter.
Excluding food and energy, the index declined to 1.8% from 2.7%.
Yet while the economy showed marked improvement in the third quarter, the U.S. still faces plenty of obstacles and economists caution that growth could slow again: Worker wages are flat, hiring is slow and the nation’s unemployment rate remains stubbornly high at 9.1%, among other things.