WASHINGTON, Oct 29: The US economy grew at a slower-than-anticipated but still solid 3.7-per cent annual pace in the third quarter, the government said on Friday in the last major report before November 2 elections.

Wall Street analysts had been tipping an expansion of about 4.3 per cent after second-quarter growth of 3.3 per cent. The report gave roughly equal dollops of comfort to President George W. Bush and his Democratic challenger John Kerry, each trying to elbow the other in the four days before the vote.

Bush can boast of solid activity and a bounce in consumption, with consumer spending up 4.6 per cent and business investment up 11.7 per cent despite the searing crude oil and gasoline prices.

Kerry can decry a weaker-than-expected economy and warn of forecasts that near-record crude oil and gasoline prices are now poised to restrain US growth in the current quarter.

The argument could be crucial, with polls consistently showing jobs and the economy among the biggest factors for voters. "It's neutral, it doesn't change a lot for either candidate," said Moody's Investors Service chief North American economist John Lonski.

The latest report showed that consumer spending jumped 4.6 per cent, recovering from a meagre 1.6 per cent growth pace in the second quarter. But imports, which detract from growth, leapt 7.7 per cent, while exports rose 5.1 per cent. And businesses built up their stocks at a much slower pace, subtracting 0.48 percentage points from the growth pace.

Joel Naroff, president of Naroff Economic Advisors, said the performance was weaker than expected. But "it is still a very good performance," he said. "Consumers spent, businesses invested and exporters exported, meaning that the economy expanded solidly in the summer."

Most analysts see a deceleration ahead, however. "We expect a significant slowdown in the fourth quarter and in 2005 due to the negative effect of higher oil prices, a less accommodative policy mix and a persistence of risk aversion from businesses," said CDC Ixis economist Marie-Pierre Ripert. The report also showed core inflation for prices paid by consumers collapsed to a 42-year low. -AFP