- Associated Press - Tuesday, November 23, 2010

WASHINGTON (AP) — The economy grew slightly faster last summer than first thought, benefiting from stronger spending by U.S. shoppers and improved overseas sales of U.S. goods.

The Commerce Department reported Tuesday that the economy expanded at a 2.5 percent annual rate in the July-September quarter. That was better than the 2 percent pace initially estimated last month.

The pickup in growth comes after the economy slowed sharply in the spring, advancing at an anemic rate of just 1.7 percent. Still, the economy would need to grow at least twice as fast as it did in the third quarter to make a dent in the 9.6 percent unemployment rate.

That’s why the Fed recently jumped in with a second round of stimulus. The Fed announced Nov. 3 that it will buy $600 billion worth of government bonds.

The effort is aimed at getting Americans to spend more by making loans cheaper and by boosting stock prices. But no one — including Fed Chairman Ben Bernanke — thinks the program would create the robust growth needed to ratchet down the unemployment rate.

“Growth is not where we want it to be or where it should be,” said economist Ken Mayland of ClearView Economics, after the new reading on economic activity.

In another report, sales of previously owned homes slipped slightly in October. High unemployment and hard-to-get credit kept buyers away.

The National Association of Realtors said existing-home sales dipped 2.2 percent last month to a seasonally adjusted annual rate of 4.43 million units.

Sales in October were 38.9 percent below their peak of 7.25 million units set in September 2005 during the height of the housing boom.

The median price for a home sold in October was $170,500, down 0.9 percent from a year ago. Prices continue to be depressed by weak sales and a huge overhang of unsold homes.

In the third quarter, consumers boosted their spending at a 2.8 percent pace, the most in nearly four years. That was a stronger showing than the 2.6 percent pace first estimated.

Even with the improvement, consumers would need to spend more to have a significant impact on the jobs market. That’s because consumer spending accounts for roughly 70 percent of all national economic output.

Paul Dales, an economist at Capital Economics, said a “meaningful acceleration” in consumer spending seems unlikely while job growth remains muted and Americans are struggling to repair their finances at a time when their home values are dropping.

Sales of U.S. exports to foreign customers grew at a 6.3 percent pace in the third quarter, another factor in the third-quarter bump-up. That compared with a 5 percent growth rate first estimated. A weaker value of the U.S. dollar is helping those sales. The falling dollar makes U.S. goods cheaper — and thus more attractive — to foreign buyers.

Business spending on equipment and software also turned out to be stronger. It grew at a 16.8 percent pace, compared with a 12 percent growth rate first estimated. And spending by state and local governments nudged up at a 0.8 percent rate, another factor in the upward revision. The government first estimated that such spending dipped by 0.2 percent.

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