New-home sales drop

The increase in the rate of growth, though, is likely to be fleeting. The deepening housing slump and a painful credit crunch since the spring have darkened the mood of individuals and businesses alike. That has led analysts to predict that economic growth has slowed considerably in the quarter that ends Sunday.

The National Association for Business Economics believes growth in the third quarter — the period from July through September — slowed to a pace of around 2.4 percent. It predicts the growth rate in the final three months of this year will be around 2.5 percent. Others think growth will turn out to be weaker than those projections.

Fears that the troubled housing market and credit problems could short-circuit the 6-year-old economic expansion have shaken Wall Street. The biggest worry is that people and businesses will cut back on their spending and investment, throwing the economy into a tailspin.

Former Federal Reserve chief Alan Greenspan, in an interview with The Associated Press last week, said the odds of a recession are now higher than one-in-three but are still under 50 percent.

To help protect the economy from the ill effects of the housing slump and credit crunch, the Federal Reserve last week slashed a key interest rate. The hope is that lower rates will induce more spending and investment and thus energize overall economic activity. Analysts believe another rate cut will come in late October.