WASHINGTON Dc, USA — THE economy grew slightly faster last summer than first thought, benefiting from stronger spending by American shoppers and improved overseas sales of US goods.

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

The pickup in growth comes after the economy slowed sharply in the spring, advancing at an anaemic rate of just 1.7 per cent. 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 per cent 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 US$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 programme 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 per cent last month to a seasonally adjusted annual rate of 4.43 million units.

Sales in October were 38.9 per cent 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 US$170,500, down 0.9 per cent 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 per cent pace, the most in nearly four years. That was a stronger showing than the 2.6 per cent 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 per cent 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.

On Wall Street, investors looked past the better reading on third-quarter economic growth. The Dow Jones industrial average was down more than 170 points in morning trading, reflecting investors concerns about a Korean military conflict and economic problems in Europe.

Sales of US exports to foreign customers grew at a 6.3 per cent pace in the third quarter, another factor in the third-quarter bump-up. That compared with a five per cent growth rate first estimated. A weaker value of the US dollar is helping those sales. The falling dollar makes US 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 per cent pace, compared with a 12 per cent growth rate first estimated. And spending by state and local governments nudged up at a 0.8 per cent rate, another factor in the upward revision. The government first estimated that such spending dipped by 0.2 per cent.

The housing market, which led the country, into recession, remains a weight on the economy. Builders slashed spending on housing projects at a pace of nearly 28 per cent.

Yesterday’s report also showed that growth in companies after-tax profits slowed in the third quarter. Profits increased at a one per cent pace, compared with a 3.9 per cent pace in the second quarter, according to one measure contained in the report. Before taxes, companies earned profits of US$1.66 trillion in the July-September period, the best quarter on record. Companies are producing more while keeping their staffs fairly lean.

Looking ahead, analysts see the economy mired in a rut of slow growth and high unemployment.

Leading economists polled in a recent AP Economy Survey predict the economy will expand at a 2.4 per cent pace in the October-December period. Growth would only be a tad better — logging a 2.5 per cent — in the first three months of 2011, according to the AP survey.

Under one rule of thumb, the economy would need to grow by five per cent for a full year to push down the unemployment rate by a full percentage point. But for all of this year, the economy is expected to expand 2.6 per cent.

Faced with such a weak outlook, Bernanke didn’t think the central bank could afford sitting back and not doing something to invigorate the economy.

Still, China, Brazil, Germany and other countries are irked by the Fed’s bond-purchase plan. They have complained that it is intended to further drive down the value of the US dollar, giving US exporters a competitive advantage over their foreign rivals. And Republican economists and lawmakers have criticised the move, saying it could lead to runaway inflation. Bernanke has vigorously rejected such criticism.

The government provides a total of three estimates of gross domestic product for any given quarter. GDP measures the value of all goods and services — from machinery to manicures — produced within the United States. Each new reading is based on more complete information.