Factory growth, construction spending brighten 2014 economic outlook

WASHINGTON — 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 21/2-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 healthy growth since the recession 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 dipped 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.

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. 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.

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.

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.

Factory growth, construction spending brighten 2014 economic outlook 01/02/14 [Last modified: Thursday, January 2, 2014 7:33pm]

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