Still, consumers and businesses appeared to be more cautious during the summer, according to the GDP report.
Consumer spending grew at a weaker 1.4 percent rate in the third quarter, down from the 2 percent rate estimated a month ago and nearly in line with the 1.5 percent rate in the second quarter.
Businesses spending on equipment and software fell at an annual rate of 2.7 percent in the third quarter, the first decline since the depths of the recession in April-June 2009.
The report showed continued strength in homebuilding, which rose at an annual rate of 14.2 percent. And government spending expanded at an annual rate of 3.5 percent, marking its first positive contribution to overall economic growth in two years. The increase was driven by a big jump in defense spending.
While economists predict slower growth in the final months of the year, several reports suggest economic activity picked up in October and early November. And if Congress and the White House reach agreement and avoid the fiscal cliff, economic growth could accelerate next year, many economists say.
A Federal Reserve survey released Tuesday showed improved consumer spending and steady home sales helped lift growth from October through early November in most parts of the United States. The one exception was the Northeast, where the storm led to widespread disruptions.
The Labor Department said employers added 171,000 jobs last month and hiring in September and August was stronger than previously thought.
Rising home values, more hiring and lower gas prices pushed consumer confidence in November to the highest level in nearly five years, according to the Conference Board.
A better mood among consumers appears to have encouraged businesses to invest more in October after pulling back during the summer.
There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites during the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.