WASHINGTON – The U.S. economy grew at an annual rate of 3.1 per cent over the summer as consumers spent more and state and local governments added to growth for the first time in three years. But the economy is likely slowing in the current quarter.

The Commerce Department’s third and final estimate Thursday of growth for the July-September quarter was revised up from its previous estimate of a 2.7 per cent annual growth rate.

Growth in the third quarter was more than twice the 1.3 per cent growth rate in the April-June quarter. But disruptions from Superstorm Sandy and uncertainty weighing on consumers and businesses from the “fiscal cliff” are likely holding back growth in the October-December quarter. Many analysts predict an annual growth rate of just 1.5 per cent for this quarter.

Robert Kavcic, an economist at BMO Capital Markets, said the upward revision to third-quarter growth didn’t change his view that the economy is slowing in the current quarter to an annual growth rate below 2 per cent. Kavcic said a temporary jump in defence spending and business stockpiling in the July-September period is likely being reversed this quarter.

And many economists aren’t expecting much improvement in the January-March quarter. The latest forecast from 48 economists for the National Association of Business Economics is for an annual growth rate of just 1.8 per cent in the first quarter of 2013. Growth at that level is considered too weak to significantly lower the unemployment rate, which was 7.7 per cent in November.

But if Congress and the White House reach agreement to avoid the fiscal cliff, growth could accelerate next year, many economists, including Federal Reserve Chairman Ben Bernanke, have said. The Fed last week said it plans to keep a key interest rate at a record low as long as unemployment remains above 6.5 per cent. And it forecast that unemployment would stay that high until late 2015.

The government’s final estimate of a 3.1 per cent growth rate for gross domestic product last quarter is a sharp improvement over its initial estimate of a 2 per cent rate — a figure that it later revised up to 2.7 per cent based on a buildup in business stockpiles.

GDP measures the nation’s total output of goods and services — from restaurant meals and haircuts to airplanes and appliances.

The further upward revision this month reflected stronger consumer spending, which accounts for about 70 per cent of economic activity. The government said consumer spending grew at an annual rate of 1.6 per cent in the third quarter, above its previous estimate of 1.4 per cent.

The Commerce Department also revised up its estimate of spending by state and local governments to show a gain of 0.3 per cent — the first quarterly increase in three years. State and local governments had previously been slashing payrolls and other spending in the aftermath of the Great Recession. Total government spending grew at 3.9 per cent annual rate last quarter, reflecting a surge in defence spending.

The NABE forecasting panel has said it expects GDP to grow 2.1 per cent in 2013, little changed from expected 2.2 per cent expansion this year. That would continue the tepid growth that has persisted since the official end of the recession in mid-2009.

But the NABE panel said it thinks growth will accelerate later in the year as long as Congress and the administration resolve their debate over taxes and government spending. Doing so would remove the uncertainty that, in part, is holding back spending, many economists say.