Business Activity in U.S. Grew More Than Forecast in January

Business activity in the U.S. expanded more than forecast in January, a sign manufacturing picked up at the start of the year.

The MNI Chicago Report’s business barometer rose to 55.6 this month, the highest since April, after 50 in December. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 48 economists surveyed by Bloomberg was 50.5.

A fourth-quarter acceleration in consumer spending may encourage firms to boost orders and production in early 2013, a sign manufacturing will keep adding to growth in the world’s largest economy. The report contrasts with data showing factory activity in the Philadelphia and New York area shrank this month as the risk of automatic government-spending cuts looms.

“The forward-looking indicators in the index were especially strong, which is encouraging,” said Millan Mulraine, a New York-based economist at TD Securities LLC, who projected an increase in the Chicago measure. “There’s some upside momentum in manufacturing.”

Bloomberg survey estimates ranged from 48.5 to 53.

Stocks fluctuated after the report. The Standard & Poor’s 500 Index decreased 0.1 percent to 1,501.23 at 10:45 a.m. in New York.

Orders Jump

The MNI Chicago Report’s gauge of new orders jumped to a 10-month high of 58.2 in January from 50.4 a month earlier. A measure of employment climbed to 58, the highest level since June, from 46.8. Production accelerated, with the index rising to 60.9, also a 10-month high, from 52.4, today’s report showed.

The Federal Reserve Bank of Philadelphia’s general economic index dropped to minus 5.8 in January from 4.6 in December, according to a report earlier this month. Readings lower than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

A similar report earlier this month from the New York Fed showed manufacturing contracted in January for the sixth straight month. The bank’s general economic index fell to minus 7.8 from minus 7.3 in December. The region encompasses New York, northern New Jersey and southern Connecticut.

The Chicago report “is a stark contrast to other regional reports,” said Mulraine. “We have to give some credence to the other regional reports as well.”

Business investment in equipment and software climbed at a 12.4 percent annual rate in the fourth quarter, the best performance in more than a year, Commerce Department data showed yesterday.

Growth in the world’s largest economy unexpectedly stalled in the last three months of 2012 as military outlays plunged by the most in 40 years and inventories grew at a slower pace. Gross domestic product shrank at a 0.1 percent annual rate from October through December.

Before it's here, it's on the Bloomberg Terminal.