Mass. economic recovery continues to outpace nation’s

By Megan Woolhouse , Globe Staff

The state’s economic recovery continued to outpace the nation’s, although economists predicted shrinking global demand for the state’s technology products could hurt future growth, according to a new report released today by the University of Massachusetts.

Massachusetts’ economy grew at an annual rate of 3.9 percent between July and September, up from 3.4 percent in the previous quarter. The U.S. economy grew at a 2.5 percent annual rate during the same period, nearly doubling from 1.3 percent pace in previous quarter. according to the U.S. Department of Commerce reported today.

It was the strongest national growth rate in a year.

The quarterly report on the state economy, published by the University of Massachusetts Donahue Institute in collaboration with the Federal Reserve Bank of Boston, noted that the better-than-expected growth will help the state likely avoid a second, or “double dip” recession.

The pace of growth, however, appears insufficient to make a significant dent in unemployment, according to the report. The unemployment rate in Massachusetts was 7.3 percent in September, compared to 9.1 percent nationally.

The report, however, projected that the state economy will slow to 2.7 percent growth rate in the last three months of this year, noting several risks on the horizon. Among them: an economic meltdown in Europe and the possibility that US political leaders could fail to resolve the nation’s debt problems. European leaders today reached agreement on a package aimed at addressing debt and banking problems.

Demand for the state’s technology products is also expected to slow, due to worldwide decline in demand for equipment. Semiconductor and semiconductor equipment manufacturing industries have been a key driver of growth in the state during the recession and recovery.

The analysis also found that Massachusetts exports declined between June and August from the previous three-month period, and that businesses in Massachusetts reported net job losses in August and September. The report’s analysis of employee withholding and sales tax receipts found that wage and salary income in the state has slowed.