WASHINGTON (Reuters) - New US claims for jobless aid fell last week, while manufacturing in the nation's Midwest region grew faster than expected in September, supporting the view that economic activity picked up a bit in the third quarter.

Another report yesterday showed consumer spending was slightly stronger than expected in the April-June period, causing the government to revise its second-quarter growth estimate up to a 1.7 percent annualised pace from 1.6 percent.

Although the reports further diminished fears of a new economic downturn, analysts said on their own they did not change perceptions the Federal Reserve would embark on a fresh round of monetary easing as early as November.

September employment data due next Friday and inflation reports later in October would be key, they said.

"They are going to see how the data unfolds and possibly put a smaller quantitative easing programme on the table at the next meeting," said Troy Davig, a senior US economist at Barclays Capital in New York.

The Fed, which has already pumped $1.7 trillion into the economy by purchasing mortgage-related and government bonds, next meets on November 2 to 3. Officials could announce a smaller bond buying program and evaluate it meeting-to-meeting.

US stocks were initially buoyed by the data before falling as investors locked in profits from September's strong rally. Prices for safe-haven US government debt traded down, while the dollar fell to an eight-month low against a basket of major currencies.

Initial claims for state unemployment benefits fell 16,000 last week to 453,000, the Labour Department said, exceeding market expectations for a decline to 460,000.

Separately, the Institute for Supply Management-Chicago's business barometer rose to 60.4 this month from 56.7 in August, showing manufacturing in the Midwest perking up.

Markets had expected a reading of 55.9 for the index, which is seen as closely correlated with national trends. A reading above 50 indicates expansion in the regional economy.

The employment component of the index sank to its lowest since May, but new orders rose strongly.

"We can stop talking about a double dip, but we are going to grow much more slowly than most people's memory of a recovery will cause them to expect," said Jerry Webman, chief economist at OppenheimerFunds in New York.

The economy slowed down in the second quarter after a 3.7 percent growth pace in the first three months of the year, leaving the recovery from the longest and deepest downturn since the Great Depression with little strength to chip away at a 9.6 percent unemployment rate.

Worried about the slow growth pace and low inflation, the Fed last week signaled it was ready to inject more money into the economy.

The Fed's preferred measure of inflation - the personal consumption expenditures price index, excluding food and energy - rose at a slow 1.0 percent rate in the second quarter, a slight downward revision from the 1.1 percent increase the government had estimated last month.

"We would be very surprised if they came out with a shock and awe programme of say one trillion (dollars) because that would be uncomfortably close to the size of the federal debt over the next year," said Barclays Capital's Mr. Davig.

The US central bank purchased bonds as a way to push down an array of borrowing costs after cutting overnight rates to near zero in December 2008.

The GDP report on Thursday provided some encouraging signs on consumer spending, which accounts for more than two-thirds of US economic activity.

Second-quarter spending was revised up to a 2.2 percent growth rate, the fastest pace in three years, from the previously reported two percent rise. Spending grew at a 1.9 percent rate in the January-March period.

Growth was also supported by a bigger accumulation in business inventories than previously thought.

But the largest increase in imports in 26 years kept growth on a weak trajectory. Analysts believe the surge in imports was likely the result of Chinese exporters rushing to push through goods before the expiration of value added tax rebates.

They do not expect the robust import growth pace to continue, which means trade will be less of a drag on the economy in the third quarter. Many expect a growth pace of around two percent in the July-September period.

"This...is not fast enough to absorb the unemployed, but enough so that the economy does keep moving forward," said OppenheimerFunds' Mr. Webman.

In the second quarter, business investment was revised a touch lower, to reflect weak spending on structures, but remained the largest advance since the first quarter of 2006.