WASHINGTON – Spending by American consumers probably picked up in the third quarter, helping the world’s largest economy overcome a slump in business investment that is holding back the expansion.

Gross domestic product rose at a 1.8 per cent annual rate after expanding at a 1.3 per cent pace the prior quarter, according to the median forecast of 66 economists surveyed by Bloomberg ahead of Commerce Department data Oct. 26. It would be the first back-to-back readings lower than 2 per cent since the US was emerging from the recession in 2009.  An improving housing market is helping boost household confidence just as companies cut back on replacing outdated equipment on concern about the so-called fiscal cliff. Federal Reserve policy makers will meet this week for the first time since announcing another round of stimulus in August aimed at shoring up growth that may help reduce unemployment.
“The economy is still in recovery mode,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The consumer is looking better than we’d anticipated. Business spending is a concern.”
Consumer spending is projected to have increased at a 2.1 per cent annual rate last quarter following a 1.5 per cent gain from April through June, according to the survey median.
Retail sales in September and August had the best back-to- back showing since late 2010 as shoppers snapped up goods from cars to Apple Inc.’s iPhones, a sign demand was heading into the year-end holidays on a high note. Target Corp. (TGT), the second- biggest US discounter, was among chains whose same-store sales last month topped analysts’ estimates.