Economic Reports Point to Bumpy Recovery

NEW YORK (Reuters) - Regional economic reports on Monday suggested the U.S. economy has clambered back to levels associated with the end of recession, but recovery will be patchy and may prove fleeting.

Economic activity and manufacturing data for the U.S. Mid West and Texas hinted the impact of the global financial crisis is slowly abating as the economy emerges from the longest recession in 70 years.

However, an index of national economic activity slipped on a monthly basis and a Texas manufacturing output index fell.

"Those kind of reports tend to support the argument that this recovery will be more uneven and less V-shaped, but with the caveat that these are somewhat narrow regional surveys," said Kevin Flanagan, fixed-income strategist for global wealth management with Morgan Stanley in Purchase, New York.

The indices preceded gross domestic product results on Thursday, the broadest measure of economic health, likely to confirm widely-held views the United States returned to growth in the third quarter. The data is a key focus in markets.

"This week, the most important report is Thursday's GDP release...which is expected to show one of the more robust readings we have seen in the last few years and will give rise to the notion statistically speaking that the Great Recession has ended," Flanagan said.

According to the median forecast of economists polled by Reuters, the U.S. economy grew 3.3 percent in the third quarter after shrinking 0.7 percent in the second quarter.

Market participants will also be watching to see if the Federal Reserve changes its language on quantitative easing measures and future interest rate decisions in response to the shifting economic conditions at the central bank's two day, Nov 3-4 policy-setting meeting next week .

Monday's Chicago Federal Reserve report showed its three month moving average of economic activity has neared levels seen at the end of previous recessions.