US factories boost production
By Christopher S. Rugaber |
January 5, 2011, Wednesday
|
Print Edition
Print Edition
UNITED States factories are cranking up production, anticipating greater spending by consumers and businesses in 2011. Tax cuts will give people more money to buy cars, computers and electronic goods, and provide incentives for businesses to invest in equipment.
Manufacturing activity has expanded in every month since the recession ended a year and a half ago. The big difference now is that the growth is being driven by higher sales and more confident consumers - not just businesses rebuilding the stockpiles that they slashed during the recession.
Steady hiring is likely to follow. Economists caution that it will only be enough to chip away at the 9.8 percent unemployment rate this year. Still, they expect it will give the economy a shot of momentum, putting more money into people's pockets and encouraging them to spend more freely. And that will lead to more hiring in other areas of the economy.
"You're in a situation where a virtuous cycle is beginning to materialize," according to Eric Green, chief economist at TD Securities.
The latest sign came on Monday when the Institute for Supply Management said the manufacturing sector expanded for the 17th straight month in December. The trade group of purchasing managers said its index of manufacturing business activity increased to 57 last month, a seven-month high. Any reading over 50 indicates growth. That is well above the recession's low of 32.5, hit in December 2008. But it's below the reading of 60.4 in April, the highest level since June 2004.
New orders rose to the highest level since May and production jumped, according to the report. The ISM surveys purchasing managers at about 350 companies around the country to compile the index.
A separate report on Monday showed construction spending rose in November for the third straight month. Builders began work on more homes and the government boosted its investment in construction projects to lift spending to US$810.2 billion, the Commerce Department said. Still, that's only 2.3 percent above August's figure, which was the lowest level in a decade.
Manufacturing activity has expanded in every month since the recession ended a year and a half ago. The big difference now is that the growth is being driven by higher sales and more confident consumers - not just businesses rebuilding the stockpiles that they slashed during the recession.
Steady hiring is likely to follow. Economists caution that it will only be enough to chip away at the 9.8 percent unemployment rate this year. Still, they expect it will give the economy a shot of momentum, putting more money into people's pockets and encouraging them to spend more freely. And that will lead to more hiring in other areas of the economy.
"You're in a situation where a virtuous cycle is beginning to materialize," according to Eric Green, chief economist at TD Securities.
The latest sign came on Monday when the Institute for Supply Management said the manufacturing sector expanded for the 17th straight month in December. The trade group of purchasing managers said its index of manufacturing business activity increased to 57 last month, a seven-month high. Any reading over 50 indicates growth. That is well above the recession's low of 32.5, hit in December 2008. But it's below the reading of 60.4 in April, the highest level since June 2004.
New orders rose to the highest level since May and production jumped, according to the report. The ISM surveys purchasing managers at about 350 companies around the country to compile the index.
A separate report on Monday showed construction spending rose in November for the third straight month. Builders began work on more homes and the government boosted its investment in construction projects to lift spending to US$810.2 billion, the Commerce Department said. Still, that's only 2.3 percent above August's figure, which was the lowest level in a decade.
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