WRAPUP 2-US factory growth quickens; more Fed easing on tap

* U.S. manufacturing sector growth quickens in October

* Consumer spending rises 0.2 pct in September

* Incomes fall for the first time in 14 months

* Core PCE index flat, year-on-year rate lowest since 2001
(Adds ISM, construction spending data, changes dateline)

NEW YORK, Nov 1 (BestGrowthStock) – Surprisingly strong growth last
month in the U.S. manufacturing sector was good news for a
sluggish economy but was probably too little, too late to stop
the Federal Reserve from more monetary easing.

The quicker pace of factory growth was also tempered by a
separate report showing U.S. personal income fell in September
while consumer spending remained tepid.

The data was among the last before central bank officials
gather Tuesday and Wednesday to assess the economy and its
uneven recovery from the worst downturn in 80 years.

The Fed is expected to inject more money into the economy
through bond purchases, and that view was bolstered by the
consumer data, which showed no inflation pressure in the

All of that overshadowed news that the Institute for Supply
Management’s index of national factory activity rose to 56.9 in
October from 54.4, with the employment, new orders and prices
paid components of the index also rising.

“The focus will be on the elections and the Fed this week,
so the impact from this won’t be as strong as it would have
been otherwise,” said David Kupersmith, head trader at Third
Wave Global Investors in Greenwich, Connecticut.

“But the ISM is one of the most important pieces of data
out there and the Fed will be looking at it as it prepares its
comments,” he added.

U.S. stocks (Read more about the stock market today. ) rose, boosted partly by strong U.S. and Chinese
factory data, while the dollar rose and U.S. Treasury prices
turned negative.

Alan Ruskin, global head of G10 currency strategy at
Deutsche Bank, said the Fed won’t be able to change course
easing based on one strong ISM report.

But he said it would provide fuel for Fed hawks who are
dubious about more easing and “will tend to add to expectations
that the Fed will want maximum flexibility to turn off the
printing press” should strong economic data warrant it.

Separate data Monday showed U.S. construction spending rose
unexpectedly in September, driven by a one-year high in
investment in public projects.

For graphics, click on:

U.S. personal consumption:


ISM manufacturing PMI



Beyond manufacturing, though, the economy still looks less
than robust. The Commerce Department on Monday said consumer
spending rose 0.2 percent in September after advancing 0.5
percent in August. It was held back by a surprise 0.1 percent
decline in income, the first slide since July 2009. Economists
had expected a 0.2 percent gain.

While the data was included in Friday’s advance
third-quarter gross domestic product report, analysts said it
underscored the loss in momentum as the quarter ended.

What’s more, the Fed’s preferred measure of consumer
inflation — the personal consumption expenditures price index,
excluding food and energy – was flat in September for the first
time since April. The index rose 0.1 percent in August.

“The Fed’s focus on inflation and quantitative easing was
reflected by today’s PCE deflator number, which continues to
head down to historical lows,” said Joseph Trevisani, chief
market analyst at FX Solutions in Saddle River, New Jersey.

The economy grew at a sluggish 2 percent annual pace in the
third quarter after expanding 1.7 percent in the prior period,
driven by a large accumulation in business inventories and an
acceleration in consumer spending.

The central bank, which cut overnight interest rates to
near zero in December 2008, has already bought about $1.7
trillion worth of Treasury and mortgage-related debt.
(Reporting by Steven C. Johnson and Lucia Mutikani; editing by
Neil Stempleman)

WRAPUP 2-US factory growth quickens; more Fed easing on tap