Oct. 29 (Bloomberg) -- The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars.

The world’s largest economy expanded at a 3.5 percent pace from July through September, figures from the Commerce Department showed today in Washington. Household purchases climbed 3.4 percent, the most in two years.

Policy makers will now focus on whether the recovery, supported by government spending and tax credits, can be sustained into 2010 and generate jobs. The record $1.4 trillion budget deficit means President Barack Obama has little room for maneuver as he tries to keep unemployment from rising above 10 percent, while Federal Reserve policy makers wind down emergency programs in a bid to prevent a surge in inflation.

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