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Despite the hurricanes, US economy makes gains

But spending slump expected to slow growth

WASHINGTON -- The US economy grew last summer at the fastest pace in a year and a half as booming auto sales offset the adverse effects of hurricanes Katrina and Rita. But the year is expected to end with much slower growth.

The Commerce Department reported yesterday that the gross domestic product, the broadest measure of economic health, grew at a 4.1 percent annual rate from July through September.

''The bottom line is that we had a very strong quarter of growth," said David Wyss, chief economist at Standard & Poor's in New York.

Wyss said he believed the hurricanes had shaved about a half-percentage point from growth in the third quarter, having less of an impact than economists had originally feared.

The Bush administration, which has been trying to highlight the economy's strengths as a way to bolster the president's approval ratings, said the 4.1 percent GDP growth rate was evidence of a vibrant economy.

''The economy demonstrated its resilience in the last several months," said Commerce Secretary Carlos Gutierrez.

On Wall Street, the Dow Jones industrial average was up 28.18 points to close at 10,833.73.

Analysts believe growth has slowed substantially in the current quarter to between 3 percent and 3.5 percent, reflecting slower increases in consumer spending. The slowdown includes a slump in auto sales reflecting falling popularity for some sport utility vehicles now that gas prices are much higher.

Asha Bangalore, an economist at Northern Trust Co. in Chicago, forecast that consumer spending would slow significantly to a growth rate of 0.5 percent in the current quarter. Consumer spending accounts for two-thirds of total economic activity.

While rebuilding in the hurricane areas will offset some of the slowdown in consumer demand, analysts don't expect that stimulus to be felt until next year.

Nigel Gault, an economist at Global Insight, a private forecasting firm in Lexington, Mass., said that in addition to the drop-off in consumer spending, the economy will be held back by a surging trade deficit.

What happened: Gross domestic product grew at a 4.1 percent annual rate in 3d quarter.

What it means: That was down from a 4.3 percent estimate made a month ago but still the fastest pace since early 2004

The bottom line: Gain reflects strength of economy, especially considering that the nation was hit by hurricanes and gasoline prices that topped $3 per gallon.

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