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Economy grows, but there's concern

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By JEANNINE AVERSA

The Associated Press

Published: October 30, 2009

WASHINGTON - Fueled by government stimulus, the economy grew last quarter for the first time in more than a year. The question now is, can the recovery last?

Federal support for spending on cars and homes drove the economy up 3.5 percent from July through September. The government tax credits for homebuyers and rebates for auto purchases, however, are temporary. Consumer spending, which normally drives recoveries, could weaken without it.

If shoppers retrench in the face of rising joblessness and tight credit, the fragile recovery could tip back into recession.

Millions of Americans have yet to feel a real-world benefit from the recovery in the form of job creation or an easier time getting a loan. Even people with jobs are reluctant to spend, what with the value of homes and 401(k)s diminished.

Still, the rebound reported Thursday by the Commerce Department ended a record streak of four straight quarters of contracting economic activity.

The news lifted stocks on Wall Street. The Dow Jones industrial average gained 200 points, and broader indices also rose.

Whether the recovery can continue after government supports are gone is unclear. Many economists predict economic activity won't grow as much in the months ahead as the bracing effect of the government's $787 billion package of increased government spending and tax cuts fades.

The National Association for Business Economics thinks growth will slow to 2.4 percent in the October-December quarter. It expects a 2.5 percent growth rate in the first three months of 2010, although other economists think the pace will be closer to 1 percent.

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