NEW YORK - The U.S. commercial paper market expanded for a third straight week in another sign that the economy may be growing again as a two-year credit crunch eases, Federal Reserve data showed on Thursday.

For the week ended Sept. 2, the size of the U.S. commercial paper market, a vital source of short-term funding for daily operations at many companies, rose by $8.0 billion to $1.162 trillion, from $1.154 trillion the previous week.

Asset-backed commercial paper outstanding rose $19.5 billion to $477.3 billion after rising $41.5 billion the previous week.

Unsecured financial issuance outstanding fell $11.3 billion after rising $12.4 billion the previous week.

The overall U.S. commercial paper market peaked at about $2.2 trillion outstanding in August 2007 when the credit crisis broke out. (Reporting by Dena Aubin and John Parry; Editing by James Dalgleish)

U.S.