Economy saw 2.5% growth in third quarter

A summer of modest economic growth is helping dispel lingering fears that another recession might be imminent. Whether the strength can be sustained, though, is far from clear. Buoyed by resurgent consumer demand and strong business investment, the economy expanded at an annual rate of 2.5% in the July-September quarter, the government reported today. The expansion marks the strongest quarterly growth in a year. Nonetheless, the economy must grow at nearly double the third-quarter pace to lower high unemployment, which has hovered around 9% for the more than two years since the recession officially ended. And though consumer spending was triple the level of the second quarter, Americans earned less, on an inflation-adjusted basis, in the July-September period. That meant many people financed their spending binges by cutting back on savings. Few economists think that tradeoff can continue; they predict growth in consumer spending, which accounts for about 70% of all economic activity, will be restrained until incomes start growing at healthier levels. Such growth is unlikely until hiring picks up. Read more about today’s third-quarter report from The Associated Press here.