WASHINGTON — After declining in five of the preceding quarters, the economy grew at a 3.5 percent rate in the third quarter, the U.S. Department of Commerce reported today. The news was tempered by a report from the Conference Board that showed further deterioration of consumer confidence.

“Today’s numbers indicate that the tough decisions this administration made to rescue the economy from the abyss were correct,” said U.S. Commerce Secretary Gary Locke. “We’re headed in the right direction, and even though there are still too many Americans out of work and still much work to be done, without the action taken in the early days of this administration, the pain families are feeling today would be much worse.”

While the increase marked the largest quarter advance since the third-quarter 2007, the Conference Board’s Consumer Confidence Index dropped from 53.4 in September to 47.7 in October. Its Present Situation Index and its Expectations Index also decreased, dropping from 23 last month to 20.7 in October and from 73.7 to 65.7, respectively.

"Consumers' assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment. In fact, the Present Situation Index is now at its lowest reading in 26 years (Index 17.5, Feb. 1983),” said Lynn Franco, director of the Conference Board Consumer Research Center. “The short-term outlook has also grown more negative, as a greater proportion of consumers anticipate business and labor market conditions will worsen in the months ahead.

“Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays,” Franco added.

Additionally, consumer claiming business conditions are “bad” increased to 47.1 percent from 46.3 percent, while those claiming conditions are "good" decreased to 7.7 percent from 8.6 percent. Consumers' appraisal of the labor market was also bleaker. Those claiming jobs are "hard to get" increased to 49.6 percent from 47.0 percent, while those claiming jobs are "plentiful" decreased to 3.4 percent from 3.6 percent.  

Consumers' short-term outlook grew more pessimistic in October. Those anticipating an improvement in business conditions over the next six months decreased to 20.8 percent from 21.3 percent, while those expecting conditions to worsen increased to 18.3 percent from 14.6 percent.

The labor market outlook was also more negative. The percentage of consumers expecting more jobs in the months ahead declined to 16.3 percent from 18.0 percent, while those expecting fewer jobs increased to 26.6 percent from 22.9 percent. The proportion of consumers expecting an increase in their incomes decreased to 10.3 percent from 11.2 percent.

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