US data boost growth hopes

Economic reports issued in the US yesterday showed strong manufacturing activity, personal income growth and spending, and buoyant business confidence - bolstering expectations for firm fourth-quarter growth.

The data reinforced expectations that the Federal Reserve will continue raising interest rates when it meets later this month, but indications that inflation remains under control suggest the Fed will not be forced to take aggressive action.

The Institute for Supply Management reported that its monthly index of manufacturing activity rose in November to 57.8 from 56.8, indicating faster expansion than economists predicted.

Production slowed slightly last month, but the new orders, inventories and employment components increased.

Prices paid for commodities and other inputs continued to rise. But the prices paid index, although still high, fell from 78.5 to 74 last month.

"The components are favourable, particularly the rise in the new orders and employment components, which the markets tend to focus on," said Carey Leahy, economist at Deutsche Bank.

The Business Roundtable, the big business lobby group chaired by Hank McKinnell, Pfizer's chief executive, yesterday highlighted cost pressures for US businesses, driven by healthcare costs but also energy costs and a broader increase in commodities prices.

The group issued an upbeat survey of CEO confidence, conducted last month.

In another report yesterday, the Commerce Department said consumer spending jumped 0.7 per cent in October - far more than economists had predicted.