Evidence mounted yesterday that US companies are emerging from their long malaise - with official figures pointing to a rise in inventories and investment.
A steep rise in durable goods orders in October coincided with the release of the strongest Chicago purchasing managers' index since 1995. There was also a positive tone to the Federal Reserve's Beige Book, which provides an anecdotal survey of economic conditions.
Economists have long warned that a US recovery would not fully take hold until corporate investment recovered from its collapse in 2001. Yesterday's pick-up in business confidence holds out the prospect of more balanced and sustainable growth. The economy has been sustained largely by a combination of low interest rates and tax rebates.
Mr Richard Berner, chief US economist at Morgan Stanley, said: "The improving situation for businesses should mean that consumers will become less dependent on tax rebates and more able to rely on rising incomes fuelled by improving employment."
Durable goods orders surged by 3.3 per cent in October against the 0.7 per cent expected by analysts. The rise in the previous month was revised up to 2.1 per cent from 0.8 per cent. The revival in corporate fortunes appears to be feeding through into employment and consumer confidence.
The number of people making first-time claims for unemployment benefit fell to 351,000 in the week to November 22nd - down from an upwardly revised 362,000 in the previous week. For the past eight weeks claims have been below 400,000, the level below which the labour market is thought to be expanding.
This helped explain a rise in the University of Michigan's consumer confidence index from 89.6 to 93.7, its highest level since May last year.
The Federal Reserve's Beige Book said that expectations for holiday retail sales were generally positive. "Consumers appear to be going into Thanksgiving with a warm glow about the economy and this should spell strong Christmas spending," said Mr Marc Chandler, an economist at HSBC.
Economists were most encouraged by signs that businesses had stopped running down their inventories and were becoming more willing to invest in future production.
Mr Steve Cochrane, director of US research for Economy.com, a consultancy, said: "Encouragingly, durable goods demand is being driven by businesses."
Inventories of manufactured durable goods were up 0.2 per cent following nine consecutive monthly declines. Despite the rise, inventories remain lean and optimism is rising that companies will replenish stocks in the final three months of the year.
