Companies in the United States expanded in December at the fastest pace in almost four years, signaling the economic recovery is gaining speed heading into 2010.
The Institute for Supply Management in Chicago said yesterday that its business barometer rose to 60, exceeding the most optimistic estimate of economists surveyed by Bloomberg News and the highest level since January 2006. Readings above 50 signal expansion.
Stimulus programs and discounting have propelled a rebound in global sales that is reducing stockpiles, which may spur manufacturers to further increase production in coming months. Caterpillar Inc. is among companies that may recall dismissed staff, pointing to gains in employment that will give consumers the means to boost spending, which accounts for 70 percent of the economy.
"Manufacturing is now moving into recovery," said David Sloan, senior economist at 4Cast Inc. in New York, whose estimate was the highest among economists surveyed. "Inventories are rebuilding, and exports are looking strong, with the Asian economies looking firmer and the dollar weak."
Stocks drifted between gains and losses as lower metal prices dragged down commodity producers, offsetting the rise in the business barometer.
Economists projected the Chicago index would drop to 55.1 from 56.1 in November, based on the median estimate of 53 projections in the Bloomberg survey. Forecasts ranged from 52 to 58.5.
The group's gauge of orders climbed to the highest level in more than two years, and its measure of employment showed growth for the first time since November 2007, the month before the recession began. Indexes of production and order backlogs also improved.
Caterpillar, the world's largest maker of bulldozers and excavators, will bring back some laid-off workers next year as sales improve, said chief executive officer Jim Owens.
"We'll gradually begin to call people back and to rebuild our overall sales and ability to ship product," Owens said in a Dec. 11 interview with Bloomberg Television. "I think it will gradually begin to pick up as 2010 unfolds."
Caterpillar has cut about 18,700 full-time jobs and about the same number of temporary workers since December 2008 as the global recession reduced demand. The company, based in Peoria, Ill., predicts 2010 sales will increase as much as 25 percent from the midpoint of the 2009 forecast range.
Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The group has said their membership includes manufacturers and service providers, making the gauge a measure of overall growth.