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The U.S. economy grew at an annual rate of 3.1 percent over the summer as consumers spent more and state and local governments added to growth for the first time in nearly three years.

The economy expanded as expected in the fourth quarter while personal income grew at a much faster pace than previously thought, which should help underpin spending this quarter.

The U.S. economy grew at a modest 2.8 percent in the final three months of last year, the fastest growth in 2011. Americans spent more on cars and trucks, and companies built up their stockpiles. But growth in the October-December quarter — and all of 2011 — was held back by the biggest annual government spending cuts in four decades. The Commerce Department says the economy grew just 1.7 percent last year, roughly half of the growth in 2010 and the worst since the recession.

The economy grew at an annual rate of 2.5% in the three months ending Sept. 30, the government reported, easing fears that the nation would fall into a second recession but still too slow a pace to cut significantly into the high unemployment rate.

The economy grew slightly faster in the spring than previously estimated but remained dangerously weak in the face of high unemployment and higher gas prices. Many economists foresee slightly better growth in the current July-September quarter. The annual growth rate was 1.3 percent in the April-June quarter, up from an estimate of 1 percent made a month ago, the Commerce Department said Thursday. The improvement reflected modestly more consumer spending and a bigger boost from trade.

The economy grew more quickly than previously estimated in the fourth quarter as businesses maintained fairly solid spending and restocked shelves to meet rising demand.

The U.S. economy grew more than previously calculated in the third quarter, led by stronger consumer spending and fueled by labor income gains that may stoke demand into 2011.

Second-quarter economic growth was revised to an anemic 1.6%, a decline that was slightly less than many economists had predicted. But the report was a sobering cap to a week of bad economic news that has raised fears the nation could plunge into another recession.

President Barack Obama acclaimed a government report on Friday that showed the economy expanded at a 3.2 percent rate in the first quarter, saying it was an "important milepost on the road to recovery."

The government reported that output of goods and services grew at a 3.5 percent annual rate, which was faster than expected. But it will be months before job-seekers feel the benefits.