Economic growth slowed to a two percent pace at the end of summer, a slower rate than had been predicted, with the downturn in the real estate market dragging down overall business activity. The figures for the gross domestic product during the July-to-September quarter marked a slight decrease from the 2.2 percent annual rate estimated a month ago, the Commerce Department reported Thursday. The economy has been losing momentum all this year, with the worse than expected third quarter results predominately related to the deepening housing slump. Investment in home building fell at a massive 18.7 percent rate, more than had been estimated, and the largest cut in 15 years. That, in turn, contributed to a 1.2 percentage point loss in third-quarter growth, the most in nearly 25 years. In other economic news, the number of unemployed American signing up for benefits rose by 9,000 to 315,000 last week, the Labor Department reported. That figure was in line with economists' projections. The nation's unemployment rate stands at 4.5 percent, considered low by historical standards. The new GDP figure underscores just how quickly the economy has weakened this year, with the downturn in the housing market, the consequences of the Federal Reserve's two-year credit tightening campaign and surging energy prices all serving to slow economic activity. In the first three months of this year, the economy grew at a 5.6 percent pace, the strongest rate in over two years. But the second quarter saw growth slow to a 2.6 percent pace, with rising energy prices and the impact of higher borrowing costs forcing consumer and business caution. Many economists forecast a similarly slow economy for the current October-to-December period, with predictions ranging from a pace of around 1.7 percent to 2.5 percent. But analysts still believe the economy will be strong enough to avoid recession. In part, optimism may stem from relatively strong consumer spending pace in the third quarter - 2.8 percent. Business spending on equipment and software, meanwhile, rose at an annual rate of 7.7 percent, stronger than previously expected. Investment in new plants and buildings increased at a brisk pace of 15.7 percent in the third quarter, less than estimated a month ago.
