Businesses in the US expanded in December at the fastest pace in two decades, adding to evidence the world’s largest economy is accelerating heading into 2011.
The Institute for Supply Management-Chicago Inc said today its business barometer rose to 68.6 this month, exceeding the most optimistic forecast of economists surveyed by Bloomberg News and the highest level since July 1988. Figures greater than 50 signal expansion.
Gains in business investment on new equipment and growing exports to emerging economies will keep factories churning out goods in the coming year, contributing to the recovery. Reports showing consumer spending is also picking up mean retailers will need to restock shelves, giving manufacturing a further lift.
“The economy is gathering momentum,” John Silvia, chief economist at Wells Fargo Securities Inc in Charlotte, North Carolina, said in an interview on Bloomberg Television. “New orders will follow the better business confidence that is showing up. Once the American consumer starts kicking in, we will see stronger orders data.”
The median forecast of 49 economists surveyed by Bloomberg News projected the gauge would fall to 61. Estimates ranged from 59 to 63.7.
Fewer firings
A report today from the Labor Department showed claims for jobless benefits fell last week to the lowest level since July 2008, showing the labour market is improving heading into 2011. Filings decreased by 34,000 to 388,000 in the week ended December 25, fewer than the lowest estimate of economists surveyed.
The number of contracts to buy previously owned homes rose more than forecast in November, a sign sales are recovering following a post-tax credit plunge, figures from the National Association of Realtors also showed today. The index of pending resales increased 3.5 per cent after jumping a record 10 per cent in October.
Stocks fluctuated between gains and losses after the reports as optimism over the economy offset concern share valuations were too high. The Standard & Poor’s 500 Index fell 0.2 per cent to 1,257.36 at 10.18 am in New York. The benchmark 10-year Treasury note declined, pushing the yield up to 3.38 per cent from 3.35 per cent late yesterday.
The world’s largest economy expanded at a 2.6 per cent annual pace from July through September, almost a per centage point more than in the prior quarter, Commerce Department said last week. Gains in consumer spending, investments in equipment and software and inventories helped offset a growing trade gap spearheaded the pickup.
Broad-based gains
The Chicago group’s production gauge rose to 74, the highest level since October 2004, from 71.3 in November. The gauge of new orders climbed to 73.6 from 67.2. The employment measure increased to 60.2, last exceeded in April 2005, from 56.3 the prior month.
Retailers’ 2010 holiday sales jumped 5.5 per cent for the best performance since 2005, MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms, said this week. That compared with a 4.1 per cent gain a year earlier. The numbers include Internet sales and exclude automobile purchases.
Automakers are also seeing sales increase. Vehicles sold at an annualised 12.3 million rate in November.
