WASHINGTON -- The economy lost steam in the late summer but not nearly as much as first thought, a hopeful sign the country is weathering the housing slump.
The Commerce Department reported yesterday that economic growth clocked in at a 2.2 percent annual rate in the July-to-September quarter.
The new reading was a considerable upgrade from the government's earlier estimate of a 1.6 percent growth rate, which would have been the worst showing in more than three years .
The main factors for the higher estimate were stronger inventories amassed by companies and a trade deficit that didn't strain growth as much.
The improvement, however, could not hide the fact that the economy has been losing momentum all year.
Over the first three months of the year, the economy grew at a blistering pace -- 5.6 percent, the best performance in 2 1/2 years. From April through June, the growth rate was 2.6 percent as spending tightened in response to surging energy prices.
The further slowdown in late summer mostly reflected the deepening housing slump. Investment in home building fell by the largest amount in 15 years.
On another encouraging note, a Federal Reserve survey released yesterday found that most parts of the country had moderate economic growth in the late fall despite troubles in the housing market and the automotive industry.
In its beige book report, the Boston Fed reported that businesses in New England are "fairly upbeat," with the exception of retailers. Software, technology, and staffing companies reported "double-digit" increases in revenue, and commercial real estate markets continued to gather strength. "All respondents say the high end of the labor market continues to tighten."
Fresh evidence of the ailing housing market came from a separate Commerce Department report that showed new-home sales fell in October by 3.2 percent, the most in three months, although home prices did rise.