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US economy grew at 2.5%. Will that quiet talk of a double dip?

Growth rate for the US economy was 2.5 percent in the third quarter, the government reported. That's an improvement over the first half of 2011, when concerns escalated about a double dip recession.

By Ron SchererStaff writer / October 27, 2011

A shopper carrying bags is silhouetted at a mall in Los Angeles. The growth rate in the US economy was spurred in large part by somewhat stronger consumer spending

Reed Saxon/AP

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New York

Maybe there won't be a double-dip recession in the US.

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That's one possible takeaway of news that America's economy grew in the third quarter at an annual rate of 2.5 percent – a meaningful improvement over the lackluster first half of the year that had raised concerns about the prospect of back-to-back recessions.

The better growth rate was spurred in large part by somewhat stronger consumer spending, mostly for big-ticket items such as cars and light trucks, according to data from the US Commerce Department. However, the modest growth in gross domestic product (GDP) won’t do much to lower the jobless rate, which has been stuck at about 9 percent.

“You have to be growing at 3 percent or better to see any meaningful improvement in the employment situation,” says Richard DeKaser, an economist at the Parthenon Group, a strategic consulting firm in Boston.

The report on the economy’s performance comes as European leaders agreed on a plan to start to resolve the European debt crisis. The US stock market surged early Thursday, with the Dow Jones Industrial Average gaining more than 266 points – rising above 12000 for the first time since August.

"The market has priced in a Lehman Brothers-type scenario,” says Mr. DeKaser, referring to the trigger of the financial crash of 2008. “This agreement removes that fear.”

The settlement in Europe could indeed help the US economy, says John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C.

“The European agreement does remove a certain amount of uncertainty and especially the risk of a big recession in Europe,” says Mr. Silvia. “A big recession in Europe ran the risk of putting the US back in a recessionary mode.”

A key reason the economy bounced back in the third quarter was a pick-up in durable goods orders, which rose 4.1 percent (compared with a drop of 5.3 percent in the second quarter), according to the Commerce report.

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