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Regional surveys show US economy picking up

CHICAGO - A flurry of reports on Monday showed U.S. regions picking up economic steam in August, suggesting the United States is breaking free of its deep recession after almost two years.

With growth apparently poised to resume in the world’s largest economy, there is no need for additional fiscal stimulus, a survey of business economists showed. But a key central bank policy-maker warned the economy remains fragile.

Business activity in the U.S. Midwest picked up at a faster pace than expected in August to be on the cusp of expansion.

The Institute for Supply Management-Chicago’s business barometer-rose to 50.0 in August — the dividing line between growth and contraction — from 43.4 in July, outpacing a forecast of 48.0.

“The Chicago PMI report is a further indication that the U.S. economy is starting to improve,” said Shaun Osborne, chief currency strategist at TD Securities in Toronto.

New orders and production both showed expansion, a trend many strategists tied to the government’s “cash for clunkers” program. The Chicago region is relatively dependent on the automotive sector.

“There was a strong increase in new orders, which is critical,” said Pierre Ellis, senior economist at Decision Economics in New York.

Still, employment stayed soft, consistent with fears the United States could be in for a “jobless recovery” once real GDP starts to grow again.

A similar survey in the heavily industrialized Milwaukee region was also much stronger in August, hitting 56 against 45 in July.

Meanwhile, business activity in New York City expanded in August for the first time in three months, thanks to increased purchases and a slowdown in layoffs.

The National Association of Purchasing Management-New York’s seasonally adjusted index of current business conditions rose to 55.3 in August from 48.3 in July.

Improvement in purchasing volume and employment conditions signaled the worst of the city’s downturn might be ending, the group said.

With the United States apparently emerging from recession, business economists surveyed by the National Association for Business Economics dialed up their worry about the huge federal budget deficit and potential health care spending.

The economy does not need a second fiscal stimulus package, as some lawmakers have hinted at, but instead the government should cut spending over the next two years, a bi-annual NABE survey showed.

Economists polled by NABE were split on whether the policies pursued by the Federal Reserve to bolster the economy would ultimately trigger higher inflation.

Separately, William Dudley, president of the New York Fed, said in an interview on CNBC it was too early to talk about curtailing the Fed’s long-term security purchases while the economic recovery is still so fragile.

“I think it’s a little premature ... the economy still isn’t growing very fast and we do have a very high unemployment rate,” Dudley said.