THE United States economy grew at a 3.5-percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.

The Commerce Department's report yesterday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans.

"We're beginning to crawl out a very deep hole," said economist Ken Mayland, president of ClearView Economics. "It will take time to get back to normal again, and there are questions about how consumers will hold up in the months ahead. But I think the recovery will be sustained."

The much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947. It also marked the first increase since the spring of last year, when the economy experienced a short-lived uptick in growth.

The third quarter's performance - the strongest since right before the country fell into recession in December 2007 - was slightly better than the 3.3-percent growth rate economists expected.

Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.

Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump reflected car purchases spurred by the government's "Cash for Clunkers" program that offered a rebate of up to US$4,500 to buy new cars and trade in old gas guzzlers.

The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.