WEAKER consumer spending on new cars and other goods as well as slower growth in government expenditure sharply held back US economic growth during the third quarter, the Commerce Department said yesterday.

The nation's Gross Domestic Product expanded at a 2.2 per cent annual rate in the three months from July through September, less than half the robust 4.7 per cent pace posted during the second quarter.

Wall Street analysts, however, had forecast only a 1.8 per cent rate of GDP growth for the third quarter.

The initial estimate of third quarter economic performance, which will be revised twice in coming months, also showed inflation on the decline, boosting chances for steady interest rates ahead.

Many economists say the third quarter deceleration may prove temporary. Relatively strong levels of consumer confidence and steady income gains from an expanding job market are expected to lead to brisker consumer spending and a strong holiday shopping season between Thanksgiving and Christmas.

Companies built up inventories in the third quarter, apparently in anticipation of firm future sales, while investment in machinery to expand output was also strong.

Consumer spending barely grew by 0.4 per cent at a $5.2 billion annual rate in the third quarter after surging 3.4 per cent at a $38.5 billion rate in the second quarter.

The department said it was the most sluggish increase in consumer spending in nearly five years, since it dropped 1 per cent in the fourth quarter of 1991.

Two price measures in the GDP report suggested virtually no inflation threat. The implicit price deflator advanced at a 1.6 per cent annual rate in the third quarter compared with 1.8 per cent in the second quarter while the fixed weights measure - of price changes rose 1.9 per cent compared with 2.2 per cent in the second quarter.

Analysts said a more relaxed pace of growth would raise chances that policy makers at the Federal Reserve will keep interest rates steady when they meet on November 13th to set strategy.

The department said it was the fastest rate of addition to inventories in 18 months, since they were built up at a rate of $54.5 billion in the first quarter of last year.

The growth slowdown in consumer spending over the summer months covered both costly durable goods as well as more quickly used non durables, like clothing.