Export, consumer-led economic growth to fade

By Joanne Morrison - Analysis

WASHINGTON (Reuters) - The economy grew at a healthy clip in the third quarter despite a heavy weight from housing, but the strong consumer spending and export performance that held it aloft now look set to fade.

Economists expect that over the next few quarters the economy will grow at a pace less than half the surprisingly strong 3.9 percent annual rate in the July-September quarter.

"The economy grew solidly in the spring and the summer but that strong spell may be history," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.

Already, fresh signs of weakness have emerged. A report on Thursday from the Institute for Supply Management showed factory activity practically came to a halt in October, a sign tighter credit conditions and the housing downturn are now taking a toll on a broader swath of the economy.

While the Federal Reserve opted to cut interest rates a quarter-percentage point on Wednesday on top of a half-point reduction made in September, those moves have done little to brighten the dreary outlook.

Many forecasters expect the economy to grow only in the 1 percent range in the fourth quarter, and well under 2 percent during the first half of next year.

EXPORT SURGE

Much of the strength in the economy during third quarter reflected a surge in exports -- the largest since the last quarter of 2003 -- as the foreign appetite for U.S. goods jumped against the backdrop of a weaker dollar.