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US Economy Likely Grew Slowly Last Quarter

By then, they think the tax and spending confrontations that have brought gridlock to Washington should be resolved. Employers that say they won't hire or expand much until federal tax and regulatory uncertainties are resolved could start to spend more.

Some economists say the Federal Reserve's continued efforts to boost the economy by lowering long-term interest rates will help generate more borrowing and spending by consumers and businesses.

"By the time we get into the second half of 2013, the Fed's efforts to kick the economy into overdrive should be having an impact, and there should be some sort of resolution of Washington's budget issues," said Brian Bethune, an economics professor at Gordon College in Massachusetts.

Still, a panel of 40 top forecasters with the National Association for Business Economics isn't expecting significant improvement over the next two years. Last week, they predicted GDP growth of just 2.2 percent in 2013.

One problem is that companies are holding off on purchases of computers, industrial equipment and other long-lasting manufactured goods. Corporate spending has been lackluster for four straight months.

Corporate investment helped the U.S. economy emerge from the Great Recession. But businesses have grown more cautious since spring, in part because customer demand has remained modest and exports have declined as the global economy has slowed.

Many companies worry that their overseas sales could dampen further if recession spreads throughout Europe and growth slows further in China, India and other developing countries. Businesses also fear the tax increases and government spending cuts that will kick in next year if Congress doesn't reach a budget deal.

Business investment has slumped even as consumers have become more hopeful about the economy. Consumer confidence in October reached a five-year high. Retail spending surged in September, mainly because Americans bought more cars, iPhones and appliances. And home sales are up this year, contributing to a nascent housing recovery.

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