- 18Oct
Industrial production contracted in September for the first time in more than a year, pointing to continued slowdown in growth and cementing expectations of further monetary policy easing next month.
Separately, home-builder sentiment rose this month but remained at depressed levels, fortifying views that the Federal Reserve would pump more money into the economy at its meeting November 2-3 to stimulate the stuttering recovery.
"The industrial production report illustrates, if anything, economic growth is still slowing rather than beginning to pick up again, which is yet another reason for the Fed to unleash QE2 (quantitative easing)," said Paul Ashworth, a senior U.S. economist at Capital Economics in Toronto.
Industrial production fell 0.2 percent, the first decline since June 2009, after increasing 0.2 percent in August, the Fed said. Economists had expected September's industrial production to rise 0.2 percent.
The National Association of Home Builders/Wells Fargo Housing Market Index rose three points to 16 in October, beating economists' expectations for a 1-point rise to 14. A reading above 50 indicates that more builders view sales conditions as good than poor.
The index has not been above 50 since April 2006.
Prices for safe-haven government debt trimmed gains, while the U.S. dollar held near a 10-month low against a basket of currencies.
While financial markets have priced in further monetary stimulus from the Fed, it remains unclear how much money the U.S. central bank will inject through purchases of government securities.
On Friday, Fed Chairman Ben Bernanke gave his strongest signal yet that more monetary policy easing was imminent but provided no details on how aggressively the Fed might act.
The recovery has slowed markedly from the worst recession in 70 years, leaving unemployment uncomfortably high and inflation too low for Fed's liking.
