Economy appears headed for strong finish for 2010
WASHINGTON (AP) – The economy is showing new life in the final months of the year.
Factories are busier, construction spending is up, and auto sales are rising. And on Wednesday the stock market had its best day since September after a report that the private sector hired the most workers in three years.
The Dow Jones industrial average jumped more than 2 percent, enough to erase nearly two weeks of losses. Analysts said investors concluded that a stronger job market would support higher stock prices.
“The economy is starting to show better overall momentum,” said Brian Bethune, an economist at IHS Global Insight. “There’s a steady improvement in the overall tone.”
A private trade group said U.S. factory output grew for the 16th straight month in November as auto sales rebounded and businesses invested more in industrial machinery.
The Institute for Supply Management said its index of manufacturing activity came in at 56.6 for November. Any reading above 50 indicates growth. The October figure was 56.9. At the depths of the recession, it was closer to 30.
And a new survey by the Federal Reserve finds that almost all of the nation – 10 of its 12 regions – is growing economically. Only two regions, those around Philadelphia and St. Louis, report that business conditions are mixed.
Automakers are behind much of the growth in manufacturing. Ford, General Motors and Chrysler all reported double-digit sales increases for November. The news is particularly welcome for GM, which just returned as a public company.
The positive economic news comes on top of other signs that Americans are increasingly willing to spend money, raising hopes for the holiday shopping season. Measures of spending, consumer confidence and personal incomes are all up.
Research firm comScore Inc. said people spent more than $1 billion online on the Monday after Thanksgiving, 16 percent more than last year and the first time so-called Cyber Monday has ever hit that milestone.
The Dow closed at 11,255, its best finish since Sept. 1 and about 200 points shy of its highest close since the financial meltdown in the fall of 2008.
Investors were mostly responding to strong manufacturing data out of China and a report showing that small U.S. companies hired the most workers in three years. ADP Employer Services said employment at private companies jumped by 93,000 in November, the largest increase since November 2007 – right before the recession began.
Small businesses, which have struggled to get credit since the recession, had the biggest gains.
While some economists cautioned against reading too much into the ADP report because it has frequently diverged from the government’s employment figures, it was enough to raise economists’ hopes that the Labor Department’s November jobs report, due Friday, will be strong. Bethune said his firm now forecasts that 180,000 jobs were added in November, up from a previous estimate of 150,000.
There’s even improvement in the troubled construction industry. The Commerce Department said spending rose in October for the second straight month, mostly because of a jump in spending on home improvement. Spending on new home construction fell.
One CEO, Daryl Dulaney of Siemens Industry Inc., reported strong demand for industrial equipment from automakers, railroad companies and renewable-energy firms. Siemens just took a $466 million order from Amtrak for 70 electric locomotives.
Auto companies are also ordering industrial automation equipment to be more productive, Dulaney said.
The manufacturing report showed that new orders and production also grew, but at a slower pace. Factory employment grew for the 12th month in a row, although slightly slower than in October.
At the same time, American exports are being helped by a cheaper dollar. The institute’s export index grew, but not as quickly as in October.
“Manufacturing continues to benefit from the recovery in autos, but those industries reliant upon housing continue to struggle,” said Norbert Ore, chairman of the ISM’s survey committee. The ISM is a trade group of purchasing executives.
The institute surveys purchasing managers at about 350 companies around the country to compile the index.