Business Activity in U.S. Grows at Fastest Pace in Two Decades

Businesses in the U.S. expanded in December at the fastest pace in two decades, adding to evidence the world’s largest economy is accelerating heading into 2011.

The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 68.6 this month, exceeded the most optimistic forecast of economists surveyed by Bloomberg News and the highest level since July 1988. Figures greater than 50 signal expansion.

Gains in business investment on new equipment and growing exports to emerging economies will keep factories churning out goods in the coming year, contributing to the recovery. Evidence that consumer spending is also picking up means retailers will need to restock shelves, giving manufacturing a further lift.

“The factory sector continues to be one of the consistent bright spots in the economy,” Michael Gregory, a senior economist at BMO Capital Markets Inc. in Toronto, said before the report. “Businesses are continuing to invest.”

The median forecast of 49 economists surveyed by Bloomberg News projected the gauge would fall to 61. Estimates ranged from 59 to 63.7.

A report today from the Labor Department showed claims for jobless benefits fell last week to the lowest level since July 2008, showing the labor market is improving heading into 2011. Filings decreased by 34,000 to 388,000 in the week ended Dec. 25, fewer than the lowest estimate of economists surveyed.

To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.

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