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Economy grows slightly faster in third quarter

President Barack Obama speaks at Stromberg Metal Works on Friday in Beltsville, Md. Obama wants Congress to let businesses deduct the total cost of some investments, such as new equipment, through 2011 to allow for more hiring or other investments.

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President Barack Obama speaks at Stromberg Metal Works on Friday in Beltsville, Md. Obama wants Congress to let businesses deduct the total cost of some investments, such as new equipment, through 2011 to allow for more hiring or other investments.

WASHINGTON — The U.S. economy grew slightly faster in the summer as Americans spent a little more — but far too little to reduce the high unemployment that is frustrating voters before Tuesday's midterm elections.

The Commerce Department said Friday that the economy expanded at a 2 percent annual rate in the July-September quarter. It marked an improvement from the feeble 1.7 percent growth in the April-June quarter.

Consumers helped boost last quarter's economic growth with 2.6 percent growth in spending, slightly better than the 2.2 percent rate in the second quarter.

Businesses also spent more to replenish their stockpiles. That trend has provided a big lift to the economy since the recession ended. But economists note that businesses will no longer need to rebuild their stockpiles so much in coming months. So the economy won't benefit as much from such spending in the year's final three months.

Last quarter's gain in Gross Domestic Product marked the biggest quarterly increase since a 4.1 percent gain at the end of 2006, before the recession hit.

Without more spending by consumers and businesses going forward, economists fear little downward movement in the 9.6 percent unemployment rate.

"We're just muddling along," said Ken Mayland, president of ClearView Economics. "I think it is going to be hard to break out of this sluggish-growth rut."

President Barack Obama's top economist, Austan Goolsbee, acknowledged faster growth is needed to drive down unemployment. "Given the depth and severity of the recession, considerable work remains before our economy is fully recovered," he said.

The president said Friday that his mission is to accelerate the recovery. He's calling attention to a proposal he says would create jobs, grow the economy and help businesses.

Obama wants Congress to let businesses deduct 100 percent of the cost of some investments, such as new equipment, through 2011. Businesses now can deduct half of such costs.

Obama says such a break would leave businesses with extra money they could use for hiring or investments.

With consumers spending more, less went into their savings. They saved 5.5 percent of their disposable income in the July-September quarter, down from 5.9 percent in the April-June quarter. That's still a high savings rate. Before the recession, people saved only about 1 percent.

Growth in the October-December quarter isn't expected to improve much. A new AP Economy survey estimates a 2.4 percent pace.

If that's that case, the economy will end 2010 on weaker footing than it started. In the January-March quarter, the economy expanded at a 3.7 percent pace.

Under one rule of thumb, the economy would need to expand by 5 percent for a full year to knock the jobless rate down by a percentage point.

Economy grows slightly faster in third quarter 10/29/10 [Last modified: Friday, October 29, 2010 9:31pm]
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