Factory outlook bright after 17 months of growth

Inquiring minds are looking at the latest sign that came Monday when the Institute for Supply Management said the manufacturing sector expanded for the 17th straight month in December. Also the trade group of purchasing managers trade group said its index of manufacturing business activity rose to 57 last month, a seven-month high. That is well above the recession’s low of 32.5 in December 2008 but below 60.4 in April, the highest level since June 2004.

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,” said Eric Green, chief economist at TD Securities.

Amen, brother.


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