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GDP report: Economic growth picks up steam

chart_gdp_101123.top.gif By Annalyn Censky, staff reporter

NEW YORK (CNNMoney.com) -- The U.S. recovery tugged along at a faster pace in the third quarter than originally reported, driven by stronger exports and spending, the government said Tuesday.

Gross domestic product, the broadest measure of the economy, grew at an annual rate of 2.5% in the three months ending in September, the Commerce Department reported Tuesday. That's a significant improvement over the 2% growth rate first reported for the period.

"We're headed in the right direction, and a good deal of the concern that was evident with the initial release has undoubtedly diminished," said Michael Schenk, senior economist with the Credit Union National Association. "But it doesn't really get us to where we need to be."

The government calculates GDP as a measure of goods and services produced in the United States. The number is often revised multiple times. This is the second reading for the quarter.

While the number is much better than the 1.7% growth reported in the second quarter, the rate is still considered weak for a recovery.

"I think most economists would agree that 2.5% is probably too low for robust job growth. It's about neutral," said Zach Pandl, an economist with Nomura Securities.

Consumer spending increased at a 2.8% pace, the best reading for that measure since the end of 2006, up from 2.6% initially reported. Exports were also revised upward to 6.3%, from 5%.

Those two points mark a bright spot in the report, as consumer spending and U.S. exports are engines of growth needed to drive the recovery forward.

Pandl expects the Fed's latest monetary stimulus plan, referred to as quantitative easing, will help spur stronger growth in the fourth quarter, but still not robust enough to totally diminish the need for the full $600 billion plan.

"This level of growth would still be considered unacceptable from the Fed's perspective," he said. "It's not fast enough to bring inflation back up and lower the unemployment rate. On the other hand, it suggests no reason for alarm."

The reading was slightly better than expected, as economists surveyed by Briefing.com had forecast growth of 2.4% for the third quarter. To top of page

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