US economy grows at fastest pace in nearly two years

The news: The US economy grew at its fastest pace in nearly two years, defying dire warnings of a recession, as it was bolstered by consumer spending and businesses restocking.

The numbers: US gross domestic product increased at a 4.9% annualised rate in the September quarter, against economist expectations of a 4.3% rise. Growth in consumer spending, which accounts for more than two-thirds of US economic activity, accelerated to 4.0% after only rising at a 0.8% pace in the June quarter.

The context: There was a rebound in residential investment after contracting for nine straight quarters, and government spending picked up but business investment dipped for the first time in two years. The growth pace showcased the US economy's stamina despite aggressive interest rate increases from the Federal Reserve. However, growth is expected to slow in the December quarter because of the autoworkers strikes, a resumption of student loan repayments by millions of Americans and the lagged effects of the rate hikes. The report also showed underlying inflation subsiding considerably last quarter. Most economists have revised their forecasts and now believe the Fed can engineer a "soft landing" for the economy.