U.S. economy grows at fastest pace in more than two years; higher interest rates eroding momentum

The U.S. economy is performing better than expected in the third quarter as businesses built more warehouses and accumulated machinery equipment, but momentum appears to have since waned as higher borrowing costs curb hiring and spending.

The growth pace, which seemed to be the quickest in nearly two years, however, likely exaggerated the health of the economy last quarter. When measured from the income side, economic activity showed a slight improvement in moderate pace. Nevertheless, the reports from Commerce Department on Wednesday indicated that the economy is growing despite of recession scares which were predicted since late 2022.

“There’s simply not as much wind in the economy’s sails in the final quarter this year,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Gross Domestic Product registered a growth of 5.2% annualised rate last quarter, revised up from the previously reported 4.9% pace. It was the fastest pace of expansion since the fourth quarter of 2021.

It was expected by the economist that the GDP will rail at 5.0%, as per the polls by Reuters.