Economy grows in summer at best pace in 4 years; performance not expected to continue

WASHINGTON — The economy barreled ahead in the summer, growing at a 4.9 percent pace. The performance was the strongest in four years but isn't expected to last through the current quarter amid the housing slump and credit crunch. New-home sales edged up in October but sales activity still hovered near an 11-year low.

The Commerce Department's new reading of the gross domestic product from July through September, released Thursday, was even better than the government's initial estimate of a brisk 3.9 percent growth rate for period. Stronger U.S. exports to overseas buyers and more inventory investment by businesses were the main reasons for the improvement.

A second report from the department showed that new-home sales increased 1.7 percent in October from September. That left sales at a seasonally adjusted annual rate of 728,000. Even with the nudge up, sales have plunged 23.5 percent over the last 12 months. In September alone, sales dropped to a pace of 716,000, the lowest since 1996.

The median sales price of a new home fell to $217,800 in October. That is down 13 percent from a year ago. That marked the biggest annual decline in prices since September 1970. The median price is where half sell for more and half for less.

In October sales rose in all parts of the country, except for the West, where they tumbled 15.7 percent from the prior month. The slight increase in monthly sales nationwide didn't change the grim housing outlook.

And, the big pickup in GDP didn't change the picture forming in the current October-to-December quarter. That scenario is somewhat grim, with indications the economy will lose considerable steam. Growth is expected to slow to a pace of just 1.5 percent or less in the final three months of this year.

GDP is the value of all goods and services produced within the United States and is the best measure of the country's economic health.

The upgraded GDP figure for the third quarter matched economists' forecasts. The strong showing suggested that the economy was resilient even as the housing market plunged deeper into turmoil and credit problems intensified. Federal Reserve officials and other economists — looking at fresher barometers of economic activity — have warned that the economy is in for a rough patch.