Consumer confidence is increasing and factories are churning out more output this year that could help the economy withstand the effects of the automatic government spending cuts and tax increases. These were according to the reports released Friday.
Manufacturing grew in February at its fastest pace in 20 months according to the report from the Institute for Supply Management. Consumer sentiment increased in February to its highest level since November according to the survey made by the University of Michigan.
Jobs and the housing market also grew according to other data. Americans spent more in January compared to the previous month despite the drop in income that resulted from the higher taxes. Economists said that all the reports indicated that the economy is on the rise.
Consumers and businesses appear unfazed about the changes in federal policy that would slow the nation’s economy. In January, White House and Congress reached an agreement that increased income taxes on the rich and allowed a cut in Social Security taxes to expire.
The automatic spending cuts took effect Friday. The cuts could decrease government purchases and result to temporary layoffs of government workers and contractors. The spending cuts were also expected to trim around a half percentage point from the economic growth in 2013.
The Institute for Supply Management said its index of factory activity increased in February to 54.2, which is the highest level since June of 2011. The reading in January was 53.1. Readings above 50 shows growth.
The report from the ISM also showed an increase in new orders, more hiring at factories, and higher production. Manufacturing has gained for three straight months and showed that factories could help the economy after the decline through most of 2012.
The Thomson Reuters/University of Michigan consumer sentiment index increased to 77.6, which is its second straight monthly increase. The reading at the end of January was 73.8. The gain was a sign that people started to adjust to smaller paychecks as a result of the restoration of the full Social Security tax.
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