WASHINGTON — 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. But the economy is likely slowing in the current quarter.
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.
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.
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 from the "fiscal cliff" 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.
And 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 just 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 the fiscal cliff, 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 unemployment remains above 6.5 percent. And it forecast that unemployment would stay that high until late 2015.
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 slashing payrolls and other spending in the aftermath of the Great Recession. Total government spending grew at 3.9 percent annual rate last quarter, reflecting a surge in defense spending.
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