The U.S. economy is steadily recovering as manufacturing has begun to grow at a steady pace, leading factories to increase its hiring and production in March. This is in contrast to building activity in which construction spending has gone down
Employment in Manufacturing has risen to the highest it’s been in 9 months. Manufacturers have employed more than 100,000 workers over the past 3 months, almost one seventh of all net gains. Unfortunately, according to the Commerce Department, construction spending fell 1.1 percent in the month of February, a continuation in decline from the previous month. The amount spent on building homes, offices, and government projects have all fallen. Reports state that construction spending has been down since the end of the recession, almost two and a half years ago.
After the reports were made available the Dow Jones industrial average immediately rose by 64 points in midday trading in addition to the broader indexes.
A survey by the Institute of Supply management revealed that the amount of new orders was increasing at a slightly slower rate than those in February. Manufacturers have reported that their customers are low on inventory, causing backlogs to rise at a quicker pace. This implies that customers will most likely keep ordering more goods, in turn indicating that production should remain at a healthy level over the next few months.
Overseas demand seems to be easing according to an index that tracks export orders. A sample of prices paid by manufacturers have lowered a small amount but still continue to be high, which most likely means that raw materials, such as copper, plastics, and oils, are increasing in cost.
Reports by the survey state that 15 of 18 manufacturing industries have all reported increases in production. According to the government, consumers have increased their spending at a higher rate in February since 7 months previous. Spending by consumers on long lasting goods has increased by 1.6 percent in February. Businesses are also purchasing long lasting goods at an increasing rate. Production of manufacturers has been at its highest in 3 months and will most likely have to increase production in order to meet the increasing demands of businesses and consumers.
According to the Institute of Supply management index, the expansion of manufacturing has been essential to economic growth. Production has increased for almost 32 straight months. The auto industry in particular has increased dramatically since the recession. During the recession auto sales were way down causing the average age of U.S. car owners to rise up at record levels. Once the economy began to recover, consumers felt more comfortable and secure in purchasing new cars.
Because of the growth in manufacturing, the overall economy has grown to a 3 percent annual rate in the last 3 months of the previous year. This is a 1.8 percent increase from the previous quarter. There are several opinions amongst economists regarding the growth of the economy in the current quarter. Many believe it will slow down because companies will not restock nearly as much as in the fourth quarter. However there are analysts who believe the economy will increase from 2 percent to 2.5 percent in March, a view that is strengthened by the report on increased consumer spending released on Friday.
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