Consumer spending grew at a weaker 1.4 percent rate in the third quarter, down from the 2 percent rate estimated a month ago and nearly in line with the 1.5 percent rate in the second quarter.
Business spending on equipment and software fell at an annual rate of 2.7 percent in the third quarter, the first decline since the depths of the recession in April-June 2009.
The report showed continued strength in homebuilding, which rose at an annual rate of 14.2 percent. And government spending expanded at an annual rate of 3.5 percent, marking its first positive contribution to overall economic growth in two years. The rise was driven by a big jump in military spending.
While economists predict slower growth in the final months of the year, several reports suggest economic activity picked up in October and early November.
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Spending could be weak
Economists cite two reasons for the anticipated weakness in consumer and business spending:
• Spending may weaken in the final weeks of the year if lawmakers and President Barack Obama fail to reach a deal to avoid the “fiscal cliff.” That's the name for tax increases and spending cuts that would occur in January without a deal.