Factories growing despite global slowdown

NEW YORK Thu Dec 1, 2011 5:40pm EST

A worker prepares to install a door on the new Chevrolet Cruze car as it moves along the assembly line at the General Motors Cruze assembly plant in Lordstown, Ohio July 22, 2011.    REUTERS/Aaron Josefczyk

A worker prepares to install a door on the new Chevrolet Cruze car as it moves along the assembly line at the General Motors Cruze assembly plant in Lordstown, Ohio July 22, 2011.

Credit: Reuters/Aaron Josefczyk

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NEW YORK (Reuters) - U.S. factories shrugged off weakness in the global economy in November as manufacturing activity rose to its highest level in five months, a fresh sign the domestic economy was accelerating.

Recent data on consumer spending and private-sector job creation has also boosted optimism on the path of growth.

"The economy seems finally to be developing real momentum," said Ian Shepherdson, an economist at High Frequency Economics in Valhalla, New York.

Also pointing to growth, automakers reported U.S. sales rose 13.9 percent in November from a year earlier, Autodata Corp said.

The Institute for Supply Management said on Thursday its index of national factory activity rose to 52.7 from 50.8 the month before, beating analysts' expectations and showing the sector continues to expand.

The added momentum, also apparent in the report's details, reduces the chances the U.S. economy will slip into a new recession, even with an expected contraction in the euro zone.

Compared to a dismal first half of the year, the pace of U.S. growth more than doubled in the third quarter to a 2 percent annual rate. While that remains subpar, economists believe activity will prove even stronger in the final three months of the year.

The ISM measure of new orders rose to its highest level since April, and the export index also improved, albeit modestly.

"That should keep some momentum going," said Sean Incremona, an economist at 4Cast in New York. "It is good to see things are not getting worse now."

Much of the rest of the world, however, is getting worse, especially in Europe where policy-makers are fighting a raging sovereign debt crisis.

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Graphics:

U.S., global manufacturing: link.reuters.com/pub45s

U.S. construction spending: link.reuters.com/qub45s

Weekly jobless claims: link.reuters.com/feb45s

November same-store sales: link.reuters.com/zeb45s

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GLOBAL CONTRAST

The Global Manufacturing PMI, an index produced by JPMorgan based on surveys of purchasing managers, pointed to contraction in global factory activity for the third straight month in November. The index was dragged down by weakness in European and Asian factories.

But in the United States, even the country's moribund labor market is perking up. A gauge of private-sector employment on Wednesday that showed strong hiring in November has increased expectations that a more comprehensive count from the government on Friday will also show improvement.

However, a report from the Labor Department on Thursday showed new claims for unemployment insurance rose last week, a reminder the healing process will be slow.

"(Claims) are not in a danger zone, but the trend is not becoming healthier," Pierre Ellis, an economist at Decision Economics in New York, said of the claims data.

U.S. stocks fell modestly, with the positive ISM data not enough to deter investors from pulling back a day after the Dow Jones industrial average logged its best daily performance since late March 2009. U.S. Treasury debt prices also fell.

SOME HELP FROM BLACK FRIDAY

U.S. consumers appeared to be doing their part to help growth at the start of the holiday shopping, although economists warn that weak incomes could lead them to dial back on spending.

Total retailer sales over the last weekend reached $52.4 billion, up from $45 billion last year, according to the National Retail Federation. Results from retailers on Thursday showed sales at stores open at least a year rose about as much as was expected for the month of November as a whole.

Separately, the Commerce Department said construction spending rose 0.8 percent in October, while the Thomson Reuters/PayNet Small Business Lending Index showed small businesses' borrowing posted its 15th monthly double-digit increase during the month.

However, economists still see a risk of a U.S. recession next year, especially if lawmakers let extended unemployment benefits and a payroll tax cut expire at the end of 2011.

The euro zone's sovereign debt crisis also could derail the country's recovery from the deep 2007-2009 recession, which has left the U.S. unemployment rate stuck around 9 percent.

European policy-makers are trying to contain the debt troubles, and the European Central Bank signaled on Thursday it could take stronger action if political leaders agree next week on much tighter budget controls in the 17-nation euro zone.

In the U.S. report on unemployment benefits, the four-week moving average of new claims, a closely followed measure of labor market trends, increased 500 to 395,750.

"If claims start to rise from here, it would not be a good sign for the economy," said Gary Thayer, a macro strategist at Wells Fargo Advisors in St. Louis.

(Writing and additional reporting by Jason Lange in Washington; further reporting by Ellen Freilich and Chris Reese in New York, and Lucia Mutikani in Washington; Editing by Andrea Ricci, Neil Stempleman and Jan Paschal)

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Comments (20)
Harry079 wrote:
Jobless claims rise UNEXPECTEDLY.

Jobless claims fall more than EXPECTED then are revised up before they release the new UNEXPECTED rise the next week.

WHO are these hidden experts in the shadows that never seem to get the numbers right?

Take the 250,000 plus that retired in November along with the 1.6 million that got laid off and you kind of get the real picture of where we are.

And it’s not a pretty picture.

Dec 01, 2011 9:00am EST  --  Report as abuse
Savant55 wrote:
I agree completely. Yesterday, there was the pointless information that private sector jobs rose but did not add that it was due to the retail sales during the holidays. Watch the stock market today. Nearly all the ups and downs are due to this kind of convolution.

Dec 01, 2011 9:15am EST  --  Report as abuse
WMCK wrote:
Back to ’70 living standard. Cost of hiring will be reduced then companies will have more capacity to hire more. Profits are relative and happiness is also relative. We are in a general relative world, am I right?

Dec 01, 2011 9:21am EST  --  Report as abuse
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