Production, home starts to show US expansion on track

NEW YORK: The manufacturing rebound probably accelerated in January and homebuilding bounced back, adding to evidence the US expansion began the new year without missing a beat, economists said before report this week.

Production climbed 0.8% last month, the biggest gain since August, according to the median estimate of 65 economists surveyed by Bloomberg News ahead of a Federal Reserve report February 17. Builders may have broken ground on 580,000 houses at an annual pace, up 4.1% from December when colder-than-average temperatures depressed construction.

“The upswing in manufacturing is gaining traction,” said John Herrmann, chief economist at Herrmann Forecasting in Summit, New Jersey. “We’re seeing extremely strong export demand, an inventory cycle that is lifting output and replacement of high-tech products.”

Gains in spending on new equipment will probably be sustained this year as companies aim to edge out the competition and take advantage of the strengthening economy. Combined with growing demand from overseas and efforts to replenish stockpiles, following the biggest reduction on record may ensure that factories will keep expanding and hiring in coming months.

Cisco Systems, the biggest maker of networking equipment, is among companies planning to hire. The San Jose, California-based firm this month predicted sales will accelerate and said it will boost its workforce by as much as 3,000 as customers resume spending to deal with surging data traffic.

“Almost every country is saying their momentum is better than it was before, and almost every business is saying it’s more optimistic,” chief executive officer John Chambers, 60, said in a February 4 interview. “It shows a capital spending trend that’s hard to deny, on a global basis.”

Eaton Corp, the maker of hydraulics and automotive valves, is seeing demand increase in its auto and trucks unit, as is typical early in an economic cycle, chief executive officer Sandy Cutler said last week in an interview from company headquarters in Cleveland.