Washington, DC, Oct. 31--The U.S. economy gained steam in the third quarter, growing at a 3.1% annual rate, powered by hearty consumer spending, especially on big ticket items such as cars.
The rebound in third quarter gross domestic product, considered the best barometer of the nation's economic health, followed a disappointing 1.3% rate of growth in the second quarter, according to the Commerce Department. But economists worry that the growth spurt could be followed by a winter lull.
Even with the comeback, many economists predict the economy troubled by an up and down stock market, worries about a possible war with Iraq and diminishing consumer confidence is losing momentum in the current fourth quarter.
Some analysts are forecasting a fourth quarter economic growth rate of around 2%. Others believe it will be a lot weaker at only 1%. Still, most don't foresee the economy falling back into recession.
Even though the third quarter GDP performance was the strongest since the economy posted a healthy 5% growth rate in the first quarter, it was weaker than the 3.6% pace that many analysts were predicting.
Much of the strength in third quarter GDP came from consumers. Consumer spending grew 4.2% in the third quarter, up from 1.8% rate in the second quarter.
The broad shoulder of the American consumer was like Atlas holding up the economy, said Ken Mayland, economist with ClearView Economics.
Spending on durable goods‹big ticket items, including cars‹grew by a whopping 22.7% pace in the third quarter, a huge increase from the 2% pace posted in the previous quarter.
Both overall consumer spending and spending on durables in the third quarter were the strongest since the fourth quarter of last year.
All this year, consumers have been carrying the economy. But economists worry that they may be losing energy, a factor in weak fourth quarter GDP projections.
In an encouraging sign, business investment in new equipment and software grew at a 6.5% rate in the third quarter. That was the best showing since the second quarter of 2000 and was up from a 3.3% pace in the second quarter.
"That's an encouraging sign we've been watching for, waiting for," said commerce secretary Don Evans.
However, businesses continued to cut spending on new factories, office buildings and other structures at a rate of 16% in the third quarter, on top of a 17.6% rate of decline in the second quarter.
Another factor restraining third quarter GDP was slower inventory building by businesses, which are wary about the economic recovery and watched profits take a hit during the recession.
