U.S. economy grows 2% in third quarter

The U.S. economy grew at a 2 percent annual rate from July through September, buoyed by more spending by consumers and the federal government, the Commerce Department said Friday.

Even with the increase from a 1.3 percent growth rate in the April-June quarter, the economy remains too weak to rapidly boost job creation.

"We suspect that growth will slow a little in the fourth quarter and expect it to remain close to 2 percent next year," said Paul Ashworth, chief U.S. economist at Capital Economics.

The economy grew faster last quarter partly because consumer spending, which accounts for nearly 70 percent of economic activity, rose at a 2 percent annual rate, up from a 1.5 percent rate in the second quarter. Spending on homebuilding and renovations increased at an annual rate of more than 14 percent.

And federal spending surged, mainly because of the sharpest increase in defense spending in more than three years.

Growth was held back by the first drop in exports in more than three years and flat business investment in equipment and software. It was also slowed by the effects of the drought that struck the Midwest last summer. The drought cut agriculture stockpiles and reduced the economy's annual growth rate by nearly a half-point.

The government's report covers gross domestic product. GDP measures the nation's total output of goods and services -- from restaurant meals and haircuts to airplanes, appliances and highways.