US economy delivers strong Q3 growth despite looming challenges: Report  

In a sign of resilience, the U.S. economy grew by nearly 5 per cent in the July-September quarter, defying earlier warnings of a looming recession.

The fastest growth pace in almost two years was underpinned by a combination of factors, including higher wages, steady consumer spending, and businesses restocking inventory to meet soaring demand.

Investment in residential sector staged a remarkable rebound after nine consecutive quarters of contraction. While government spending increased during this period, business investment saw a dip for the first time in two years. This reduction was attributed to a decline in spending on equipment, including computers.

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Moreover, there was a considerable decrease in underlying inflation last quarter, fostering expectations that the economy is poised for a "soft-landing."

Wage growth, while slightly decelerating, continued to outpace inflation, resulting in increased purchasing power for households. However, the rise in personal taxes partially offset these wage gains, causing disposable income for households to decline by 1.0 per cent. Consequently, consumers had to dip into their savings, leading to a drop in the savings rate from 5.2 per cent in the second quarter to 3.8 per cent.

Despite the current economic strength, potential challenges lurk on the horizon. The resumption of student loan repayments, the lagged effects of recent interest rate hikes, and the United Auto Workers strikes could potentially cast a shadow over growth prospects in the fourth quarter.

(With inputs from Reuters)

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