And the all finance....
(Reuters) - The U.S. economy appears to be faring better in the third quarter than analysts had feared with automakers reporting surprisingly strong August sales on Wednesday, helping to buoy expectations of a pullback in monetary stimulus ahead.
In another report, the Federal Reserve said strong demand for autos helped keep the economy on a "modest to moderate" growth path in recent weeks, an assessment that leaves the door open for a reduction in the central bank's bond purchases.
Auto sales rose 17 percent last month to a seasonally adjusted annual rate of 16.1 million units. That was the fastest pace since October 2007 and beat the 15.8 million-unit rate analysts surveyed by Reuters had expected.
It was also the latest sign that economic activity is picking up after hitting a speed bump in July and supported stocks and bond yields, although the dollar fell from a six-week high against a basket of currencies as investors looked forward to a key jobs report on Friday.
Auto sales are a key leading indicator of consumer spending, which accounts for about 70 percent of U.S. economic activity.
"We continue to head in the right direction," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "With vehicle sales above 16 million (and) a slow but steadily improving job market, the Fed is going to feel comfortable tapering in September."
The central bank has been buying $85 billion in bonds each month to keep borrowing costs low. It is widely expected to reduce that amount when officials meet later this month and a strong gain in hiring for August would cement those bets.
A raft of weak data for July, including figures on consumer spending, industrial output, durable goods orders and homebuilding, had prompted economists to downgrade their third quarter growth estimates to as low as a 1.5 percent annual pace.
But the strong vehicle sales suggested those forecasts could undershoot.
"It may be a sign that the consumer will add more to growth this quarter than we initially thought," said Sweet. The economy grew 2.5 percent in the second quarter.
The auto sector's good fortunes were captured in the Fed's Beige Book report, which found strong demand for motor vehicles lifted spending in most parts of the country in early July through late August.
The report, prepared for the Fed's September 17-18 meeting and based on information collected from its business contacts nationwide, said several of the central bank's 12 districts reported strong demand for auto-related products.
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