Rise Reported in Factories and Consumer Confidence

Manufacturing grew in February at the fastest pace in 20 months, according to a report from the Institute for Supply Management. And a survey from the University of Michigan showed that consumer sentiment rose last month to its highest level since November.

Other data showed strength in job growth and the housing market. Americans spent a bit more in January compared with December, despite a sharp drop in income that partly reflected higher taxes.

“Consumers are spending, confidence is rising and manufacturing activity is accelerating,” Joel Naroff, president of Naroff Economic Advisors, said in a note to clients. “Just about all of today’s reports point to an economy on the rise.”

Businesses and consumers appear to be shrugging off changes in federal policy that will probably slow the still-weak economy.

In January, Congress and the White House struck a deal that raised income taxes on the nation’s top earners but also allowed a temporary cut in Social Security taxes to expire.

Across-the-board spending cuts were set to begin Friday. The cuts could reduce government purchases and lead to temporary layoffs of government employees and contractors. The reductions were expected to shave about a half-percentage point from economic growth this year.

The economic data Friday was mostly positive.

The Institute for Supply Management said its index of factory activity rose last month to 54.2, the highest since June 2011, from 53.1 in January. Any reading above 50 indicates growth. The report showed a jump in new orders, higher production and more hiring at factories. Manufacturing has grown for three consecutive months, indicating that factories could help the economy after slumping through most of 2012.

Separately, the Thomson Reuters/University of Michigan consumer sentiment index rose to 77.6, the second consecutive monthly increase, from 73.8 at the end of January. The rebound suggests that some people have begun to adjust to smaller paychecks stemming from the restoration of the full Social Security tax.

The Commerce Department reported that consumers increased spending 0.2 percent in January from December but cut back on big purchases like cars and appliances. Income plunged 3.6 percent, though it followed a jump in December driven by dividends and bonuses that were paid early to avoid higher income taxes.

In a separate report, the Commerce Department said that spending on construction projects fell in January by 2.1 percent, the largest amount in 18 months. But the decline followed a nearly 10 percent increase in construction spending in 2012, the first annual gain in five years.

Article source: http://www.nytimes.com/2013/03/02/business/economy/americans-spend-more-and-make-less-data-shows.html?partner=rss&emc=rss