U.S. economy grew 3.1% over summer

Weaker growth predicted for 4th quarter

— The U.S. economy grew at an annual rate of 3.1 percent over the summer as exports increased, consumers spent more and state and local governments added to growth for the first time in three years.

The Commerce Department’s third and final estimate Thursday of growth for the July-September quarter was revised up from its previous estimate of a 2.7 percent annual growth rate.

Growth in the third quarter was more than twice the 1.3 percent growth rate in the April-June quarter. But disruptions from Hurricane Sandy and uncertainty weighing on consumers and businesses are likely holding back growth in the October-December quarter. Many analysts predict an annual growth rate of just 1.5 percent for this quarter.

“We’re going to have some weakness closing out this year and starting off next year,” said Omair Sharif, a U.S. economist at RBS Securities in Stamford, Conn. “We really want to see business investment coming back because, ultimately, that’s going to lead to hiring.”

Many economists aren’t expecting much improvement in the January-March quarter.

The latest forecast from 48 economists for the National Association of Business Economics is for an annual growth rate of 1.8 percent in the first quarter of 2013.

Growth at that level is considered too weak to significantly lower the unemployment rate, which was 7.7 percent in November.

But if Congress and the White House reach agreement to avoid tax increases and government spending cuts, growth could accelerate next year, many economists, including Federal Reserve Chairman Ben Bernanke, have said.

The Fed last week said it plans to keep a key interest rate at a record low as long as the unemployment rate remains above 6.5 percent. And it forecast that unemployment would stay that high until late 2015.

The government’s final estimate of a 3.1 percent growth rate for gross domestic product last quarter is a sharp improvement over its initial estimate of a 2 percent rate — a figure that it later revised up to 2.7 percent based on a buildup in business stockpiles.

GDP measures the nation’s total output of goods and services — from restaurant meals and haircuts to airplanes and appliances.

The further upward revision this month reflected stronger consumer spending, which accounts for about 70 percent of economic activity. The government said consumer spending grew at an annual rate of 1.6 percent in the third quarter, above its previous estimate of 1.4 percent.

The Commerce Department also revised up its estimate of spending by state and local governments to show a gain of 0.3 percent — the first quarterly increase in three years.

State and local governments had previously been reducing payrolls and other spending in response to the recession. Total government spending grew at a 3.9 percent annual rate last quarter, reflecting a surge in defense spending.

The National Association of Business Economics forecasting panel has said it expects GDP to grow 2.1 percent in 2013, little changed from expected 2.2 percent expansion this year. That would continue the tepid growth that has persisted since the official end of the recession in mid-2009.

But the panel said it thinks growth will accelerate later in the year as long as Congress and the administration resolve their debate over taxes and government spending. Doing so would remove the uncertainty that, in part, is holding back spending, many economists say.

In a separate report, the National Association of Realtors said U.S. sales of previously owned homes jumped to their highest level in three years last month, bolstered by steady job gains and record-low mortgage rates.

The report released Thursday said sales rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November. That’s up from 4.76 million in October.

Previously owned home sales are on track for their best year in five years. November’s sales were the highest since November 2009, when a federal tax credit that was soon to expire spurred sales. Excluding that month, last month’s sales were the highest since July 2007.

Sales are up 14.5 percent from a year ago, though they remain below the roughly 5.5 million that are consistent with a healthy market.

“The report is encouraging, and the positive momentum established in the housing market during 2012 appears likely to continue into 2013,” said Barclays Capital economist Michael Gapen.

The number of Americans applying for unemployment benefits rose last week by 17,000, the Labor Department reported Thursday, reversing four weeks of declines. But the number of people seeking aid is consistent with a job market that continues to grow modestly.

Unemployment claims rose the week of Dec. 15 to a seasonally adjusted 361,000 from a revised 344,000 the week before.

The less-volatile four-week moving average fell 13,750 to 367,750, lowest since late October. Applications had surged in early November after Hurricane Sandy, then dropped back.

Just over 5.4 million people were receiving some type of unemployment benefit the week ended Dec. 1, down from nearly 7.2 million a year ago.

Information for this article was contributed by Martin Crutsinger and Paul Wiseman of The Associated Press, and Alex Kowalski of Bloomberg News

Business, Pages 28 on 12/21/2012

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