New orders for U.S. durable goods—those lasting longer than three years, such as automobiles and kitchen appliances—rose 3% in December from November, the Commerce Department said. The data suggest that business spending on equipment climbed for the first time in three months, indicating renewed confidence among companies.

While the housing market has much ground to regain, corporations are poised to boost production in coming months, powering the U.S. recovery as other parts of the world slow down. Several factors are at play. Demand for automobiles has taken off as Americans who put off purchases during the recession and early in the recovery are now replacing cars and buying new ones. In addition, manufacturers—who saw business slow over the summer—say demand is picking up.

The durable-goods numbers, along with indicators of a brighter outlook among employers, signal pockets of strength in the American economy even as Asia loses momentum and the euro zone teeters toward recession. There were gains in every major category, from primary metals to machinery, with the exceptions being electrical equipment and defense products. Orders for nondefense capital goods excluding aircraft—a proxy for business spending—rose 2.9%, after two months of declines.

Overall, good news for the recovery.

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Is this the beginning of real improvement in the economy?

Several signs point to modest improvements, and on many fronts.  U.S. consumer credit increased significantly just before the holidays, offering a ray of hope for the economy.  Bloomberg reported that consumer borrowing in the U.S. surged in November by the most in ten years, showing households are optimistic enough to take on debt and banks are willing to lend.  According to Federal Reserve figures, consumer credit increased by $20.4 billion, the biggest jump since November 2001, to $2.48 trillion. The advance was almost twice as big as the highest forecast of 31 surveyed economists.

Increasing borrowing usually signals that a drop in unemployment is giving households the courage to take advantage of holiday discounts, buy cars and finance higher education. At the same time, dependence on credit means the job market has yet to improve enough to provide the incomes needed to sustain consumer purchases, which account for about 70% of the economy. The thawing in employment comes as other reports indicate firings have eased, highlighting an improvement in the labor market that is contributing to a rebound in consumer confidence and spending.  Meanwhile, the stock market hit a five month high yesterday, and apparently, Europe’s problems are momentarily forgotten.

While this is good news, most of us are looking for sustained positive news before investing and hiring.  We are noticing that some of our clients are expanding which is very good news indeed. Stay tuned!

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