US economic growth rate fastest for two years

The US economy grew at the fastest pace in two years in the third quarter, initial figures have indicated.

The world's largest economy grew at an annual rate of 2.9% in the three months to September, the Commerce Department said.

Analysts had predicted growth of just 2.5%.

The stronger-than-forecast rate could increase expectations that the Federal Reserve will raise interest rates before the end of the year.

The annualised rate of 2.9% is equivalent to a quarter-on-quarter rate of 0.7%, which is the way that many other countries express their growth rates.

In the second quarter of the year, the US economy expanded by an annualised rate of 1.4%, or a quarterly rate of 0.4%.

'Natural bounce-back'

Consumer spending, which makes up more than two-thirds of US economic activity, grew less rapidly than in the previous quarter.

In the April-to-June period, it increased at an annual rate of 4.3%, but in the July-to-September period, the rate slowed to 2.1%.

However, this decline was offset by businesses spending money to restock their inventories after running them down in the second quarter.

"There's nothing here that will put the Fed off hiking in December," said Aberdeen Asset Management fixed income investment manager Luke Bartholomew.

"This shows that the US is roughly on track. It's a natural bounce-back following a pretty underwhelming year so far. 

"The election campaign has probably created a degree of uncertainty that has impacted growth," he added. "But underneath all of that, the labour market is still doing well and inflation is creeping up."