January factory activity in the Midwest rose to a 22.5-year high, signaling improved job prospects in the manufacturing sector in 2011. This is exactly the type of economic improvement America needs most, according to many experts.
"The factory sector news is an important positive omen for the broader economy, because increased production will yield significant income generation, which in turn will fuel stronger household consumption," Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, told Reuters.
He's referring to what's known as the Institute for Supply Management's Chicago Business Barometer, which elevated to 68.8 in January, the highest it's been since July 1988. It was up from 66.8 in December. Numbers over 50 indicate expansion in the regional economy. The January jump was attributed to increases in new orders and employment.
A separate report from the Commerce Department showed that spending increased 0.7 percent in December, growing for the sixth straight month. It only rose by 0.3 percent in November. Since spending accounts for about 70 percent of all U.S. economic activity, this is a good sign. It means consumers are becoming more confident and spending more, thus creating more need for products, which could also spur manufacturing and create more jobs.
Spending in the fourth quarter of 2011 grew at an encouraging 4.4 percent pace, which is the healthiest growth in more than four years. Spending in the last quarter of the year is traditionally the strongest, and economists caution that growth during the first three quarters of 2011 might not be as robust, but who knows? The confidence already created in January could well carry through the year.