US Economy Grows 5.2% In Third Quarter; Higher Interest Rates Sapping Momentum

• The U.S. economy experienced a faster-than-expected growth rate of 5.2% annualised in the third quarter, marking the fastest expansion since 2021. This growth was driven by increased business investments in warehouses and equipment.
• Despite the robust growth, there are signs of a slowdown. Higher borrowing costs have dampened hiring and spending, leading to a cooling of economic momentum in the final quarter of the year. Consumer spending growth was revised down to 3.6%, and there are concerns about the impact of shortages caused by the United Auto Workers strike.
• After-tax profits, as measured by S&P 500 profits, increased significantly, and personal income, driven by higher wages, contributed to the economy's growth. However, Gross Domestic Income (GDI) contracted on a year-on-year basis, raising some concerns, though it's noted that the economy has historically avoided recession with similar GDI declines.
• The report indicates that the Federal Reserve may be in a position to halt its rate-hiking campaign, as slowing demand and lower inflation create a favourable environment. Financial markets are even anticipating a potential rate cut in mid-2024, following a series of interest rate increases by the Fed since March 2022.

(Source: Reuters)