WASHINGTON, Oct. 28(Xinhuanet)-- The US economy increased at an annual rate of 3.8 percent in the third quarter of 2005, higher than the 3.3 percent in the previous quarter, the Commerce Department reported on Friday.

Analysts said that it provided a vivid evidence of US economic flexibility when it coped with the destructive forces of hurricanes Katrina and Rita.

Katrina, the costliest natural disaster in US history, struck the US Gulf of Mexico area in late August and Rita hit the area in late September. Both hurricanes destroyed businesses in several states and damaged essential oil and gas facilities, resulting in the record-high soaring energy prices higher and fanning inflation fears.

The report showed that the consumer spending, which accounts for about two-thirds of the US domestic gross product(GDP) and is the main engine of the economic growth, increased at a brisk 3.9 percent rate, the strongest pace since the end of last year. That spending reflected a big appetite for big-ticket durable goods, items expected to last for more than three years.

Businesses increased spending on equipment and software at an 8.9 percent pace in the third quarter following a 10.9 percent growth rate in the prior quarter.

Spending by the federal government, which analysts believe included some outlays due to the hurricanes, rose at a 7.7 percent rate in the third quarter, the fastest pace since the first quarter of 2004.

The report also said that an inflation gauge tied to the GDP report showed overall inflation picking up in the third quarter. But excluding food and energy prices, the"core" inflation only increased at a rate of 1.3 percent in the third quarter, down from a 1.7 percent pace in the second quarter.

The US economy increased at rates of 3.8 percent and 3.3 percent in the first two quarter of this year. Enditem