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U.S. economy grew by 2 percent July through September

WASHINGTON — The U.S. economy grew at a slightly faster 2 percent annual rate from July through September, buoyed by more spending by consumers and the federal government.

Growth accelerated from the 1.3 percent rate in the April-June quarter, the Commerce Department said Friday. Even with the increase, growth remains too weak to rapidly boost hiring.

The report is the last snapshot of the economy before Americans choose a president in 11 days.

Republican nominee Mitt Romney has criticized President Barack Obama's handling of the economy and has noted that the growth has slowed from last year. The 1.74 percent annual growth rate for the first nine months of 2012 remains slightly behind last year's 1.8 percent growth.

Still, the pickup in growth could lend weight to Obama's message that the economy is improving.

"Growth came in a little higher than we had feared, largely because of the big jump in federal spending," said Paul Ashworth, chief U.S. economist at Capital Economics. "But the economy is still not growing rapidly enough to create sufficient jobs to reduce the unemployment rate."

The economy grew faster last quarter partly because consumer spending rose at a 2 percent annual rate, up from a 1.5 percent rate in the second quarter. Spending on home building and renovations increased at an annual rate of more than 14 percent. And federal spending surged, mainly because of the sharpest increase in defense spending in over three years.

Growth was held back by the first drop in exports in more than three years and flat business investment in equipment and software.

The economy was also slowed by the effects of the severe drought that struck last summer in the Midwest. Once crop supplies return to normal, they will help boost economic growth, analysts noted.

The government's report covers gross domestic product. GDP measures the nation's total output of goods and services.

And it sketched a picture that's been familiar all year: The economy is growing at a tepid rate, slowed by high unemployment and corporate anxiety over an unresolved budget crisis and a slowing global economy.

Confidence climbs to five-year high

The University of Michigan's index of October consumer sentiment rose to 82.6 from 78.3 in September. That's the highest since September 2007 — before the Great Recession began. Falling gas prices and a slightly better job market lifted consumers' outlook. The unemployment rate fell to 7.8 percent last month, the first time since July 2009 than it has been below 8 percent.

U.S. economy grew by 2 percent July through September 10/26/12 [Last modified: Friday, October 26, 2012 8:25pm]
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