The U.S. economic growth sped up in the third quarter despite the effects of hurricanes Rita and Katrina.

The U.S. Commerce Department said today the economy grew at an annual rate of 3.8% in the third quarter.

Strong spending by consumers, businesses and government was credited for the U.S. economy;s better-than-forecast performance.

Economists had been projecting annualized growth of 3.6% for the July-to-September quarter.

In the second quarter of the year, the American economy grew at an annual rate of 3.3%.

Consumers boosted spending at a brisk 3.9% rate, while business spending on equipment and software grew at an 8.9% pace. Spending by the U.S. government grew at a rate of 7.7% rate in the third quarter.

A separate report from the U.s. Labor Department showed that labor costs were also on the rise in the quarter. The employment-cost index rose 0.8% in the July-September period, up from an unrevised 0.7% increase in the previous quarter.