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Factory, construction growth boost 2014 outlook

Associated Press
January 2, 2014
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Expectations are rising for a stronger U.S. economy in 2014 after reports Thursday showed solid growth in manufacturing and construction spending at the end of last year.

Factory activity in December stayed near a 2-1/2-year high. Americans are buying more cars and homes, increasing demand for steel, furniture and other manufactured goods. Manufacturers have boosted hiring to meet that demand and may add jobs at a healthier pace this year.

And builders stepped up spending on home construction in November, despite recent increases in borrowing rates. That suggests many remain confident in the housing recovery.

The economy has had bursts of growth since the recession officially ended in June 2009, only to be followed by disappointing slowdowns. But many analysts think growth is now more sustainable.

"There was strength in some important sectors of the economy at the end of last year," Paul Dales, an economist at Capital Economics, said. "2014 could be the year where the recovery really starts to gain some ground."

The Institute for Supply Management, a trade group of purchasing managers, said Thursday that its index of manufacturing activity slipped to 57 in December from 57.3 the previous month. But that's still the second-highest reading since April 2011. And any reading above 50 signals growth.

The ISM's measure increased for six straight months through November.

A measure of new orders rose to the highest level since April 2010. And a gauge of hiring increased to its highest level since June 2011. Indexes of production and manufacturers' stockpiles fell.

Separately, construction spending rose 1 percent in November, to a seasonally adjusted annual rate of $934.4 billion, the Commerce Department said. That's the highest in more than four years.

Spending on home and apartment construction rose 1.9 percent to the highest level since June 2008. And commercial project spending increased 2.7 percent, led by office, communication and transportation projects.

The reports add to other hopeful signs that 2014 could mark a turning point for an economy that has suffered through fits and starts since the recession ended.

Dales said the economy faces fewer barriers this year. Steep spending cuts or tax increases, which held back growth in 2013, are unlikely. Europe's economy is picking up slightly after a long recession. And U.S. consumers have more money to spend, thanks to greater hiring and last year's stock market surge.

Dales forecasts the economy will expand 2.5 percent this year, up from just below 2 percent in 2013. Other economists expect growth will top 3 percent in 2014. It hasn't been above that level for a full year since 2005.

The ISM survey followed other reports showing a healthier U.S. manufacturing sector.

Factory output rose in November for the fourth straight month, according to the Federal Reserve. And demand for long-lasting goods jumped in November, the government said last week, evidence that businesses are investing in facilities and equipment.

Strong factory output could lead to more jobs. Cooper Howes, an economist at Barclays Capital, notes that manufacturing employees are working longer weeks than at any time since World War II. That suggests factories will need to step up hiring to meet any increase in demand.

Howes expects manufacturers to add an average of 20,000 jobs a month this year. That would be a big improvement from an average of 5,000 a month in the first 11 months of 2013. December's jobs figures will be reported next week.

Overseas sales of U.S. goods are growing, but at a much slower rate, the ISM's survey found. A gauge of export orders fell to 55 from 59.5. A separate report this week showed factories in China expanded in December but at a slower pace than the previous month.

Auto sales reached the highest level in nearly seven years in November. Car makers will report December figures on Friday.

Companies rapidly increased their stockpiles of goods in the July-September quarter, one reason factories have boosted output. That helped push economic growth to an annual rate of 4.1 percent, the best in nearly two years.

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  1. Socialized medicine works great for white people in Scandanavia. It works well in Costa Rica for a population that is partly white and partly mestizo. I don't really see Obamacare as something aimed against whites. I think that is a Republican canard designed to elicit support from white people for republican candidates who don't care about them any more than democrats care about the non-whites they pander to with their phony maneuvers. But what is different between Costa Rica nd the Scandanavian nations on one hand and the US on the other? SIZE. Maybe the US is just too damn big. Maybe it just needs to be divided into smaller self governing pieces like when the old Holy Roman Empire was dismantled. Maybe we are always trying the same set of solutions for different kinds of people as if we were all the same. Oh-- I know-- that is liberal dogma, that we are all the same. Which is the most idiotic American notion going right back to the propaganda of 1776. All men are different and their differences are myriad and that which is different is not equal. The state which pretends men are all the same is going to force men to be the same. That is what America does here, that is what we do in our stupid overseas wars, that is how we destroy true diversity and true difference, and we are all as different groups of folks, feeling the pains of how capitalism is grinding us down into equally insignificant proletarian microconsumers with no other identity whether we like it or not. And the Marxists had this much right about the War of Independence: it was fundamentally a war of capitalist against feudal systems. America has been about big money since day one and whatever gets in the way is crushed. Health care is just another market and Obamacare, to the extent that it Rationalizes and makes more uniform a market which should actually be really different in nature and delivery from place to place-- well that will serve the interests of the biggest capitalist stakeholders in health care which is not Walmart for Gosh Sakes it is the INSURANCE INDUSTRY. CUI BONO Obamacare? The insurance industry. So republicans drop the delusion pro capitalist scales from your eyes this has almost nothing to do with race or "socialism" it has to do mostly with what the INSURANCE INDUSTRY wants to have happen in order to make their lives and profits easier.

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