Friday’s report gives each camp a talking point. | AP Photos GDP number a relief for Obama

The economy grew at an annual rate of 2 percent during the third quarter of 2012, federal researchers said Friday, handing President Barack Obama better than expected news in the final economic growth report to come out before the election.

The GDP growth is the latest in a string of reports suggesting the economy is recovering from its 2008 collapse, but whether it is doing so fast enough to save Obama’s job remains an open question.


The White House has enjoyed reports suggesting consumer confidence is rising as unemployment falls, but Mitt Romney continues to hammer Obama over the slow recovery, and both camps’ ability to sell voters on their economic message will be at stake next Friday when federal economists release their final pre-election report on job growth and unemployment.

The White House on Friday touted the GDP report as evidence of economic turn-around, noting the president inherited a steep recession but has since presided over three-plus years of economic growth.

“While we have more work to do, together with other economic indicators, this report provides further evidence that the economy is moving in the right direction,” said Alan Krueger, chairman of the president’s Council of Economic Advisers.

But Romney’s team was quick to highlight the sluggish pace of economic growth, which has failed to keep pace with the administration’s forecasts when passing the stimulus.

“Last quarter, our economy grew at only two percent, less than half the 4.3 percent rate the White House projected after passing the stimulus bill,” Romney said in a statement. “Slow economic growth means slow job growth and declining take-home pay. This is what four years of President Obama's policies have produced.”

The Commerce Department’s GDP report beat the forecasts of most economists, who on average had predicted a third-quarter rate of around 1.6 percent to 1.9 percent. The second-quarter GDP number was 1.3 percent.

The U.S. population grows at a rate of about 1 percent annually, so GDP growth has to keep pace to maintain the average American standard of living.

“At least from the perspective of ‘steady as she goes’ this is a good report, but we’re not breaking any records,” Jared Bernstein, a former chief economic advisor to Vice President Joe Biden, said on CNBC. "What we have here is a bit of a wait-and-see economy.”

Bernstein added that the growth was unlikely to significantly dent the current unemployment rate of 7.8 percent. The Labor Department will release an update on that rate — as well as its figures on October jobs growth — next Friday.

Former George W. Bush administration budget director Jim Nussle had a more negative take on the GDP growth. "No one should be excited that the trend is 2 percent," he said on CNBC.

The economic growth was driven by an uptick in consumer spending, alongside a bump in federal spending, according to the report.

A survey from the University of Michigan and Thomson Reuters released Friday showed consumer confidence has hit its highest level since 2007.

Much of the federal bump came from defense spending, which increased by 13 percent in the third quarter after having decreased 0.2 percent in the second. Meanwhile, nondefense federal spending increased by 3 percent this quarter after having tailed off slightly in the last one, according to the report.

The GDP report is only an advance estimate of quarterly growth, but both of the updates — which use new information to produce increasingly accurate results — will come after voters have cast their ballots.

The lukewarm GDP report prompted discussion of the looming “fiscal cliff” — a collection of automatic spending cuts and tax increases set to take effect at year’s end. Congress and the White House have expressed interest in a deal to pull back from the cliff, but they are deadlocked over Obama’s push to let tax rates expire for the wealthiest Americans.

Krueger fired a salvo in that debate Friday, urging Congress to pass legislation that would extend the tax cuts for those making less than $250,000 annually.

House Republicans favor extending those cuts as well, but they have refused to approve the extension as a stand-alone measure because doing so would leave them without leverage in the battle over income rates for the highest earners.

House Speaker John Boehner pivoted off the GDP report to blast Obama’s economic stewardship and push the president to extend the high-end tax cuts.

“House Republicans have acted to avoid the ‘fiscal cliff’ by replacing the president’s sequester, stopping the looming small business tax hike, and paving the way for long-term solutions to spur economic growth through tax and entitlement reform,” the Speaker said in a statement.

Friday’s GDP report underscores the importance of the across-the-board spending cuts, which would include the defense spending that drove much of the third-quarter growth.

The National Association of Manufacturers on Friday released a report saying that even before it takes effect, the uncertainty surrounding fiscal policy will cost the economy 0.6 percent worth of GDP growth in 2012, as well as about 1 million jobs.

Top corporate executives have said their firms will postpone major investment decisions until the fiscal debate is resolved. Friday’s GDP report showed business investment was largely flat in the third quarter.

Seung Min Kim contributed to this report.

This article first appeared on POLITICO Pro at 8:37 a.m. on October 26, 2012.