A closely watched index of U.S. manufacturing activity increased in February for the third straight month. Big increases in new orders and production pushed the Institute for Supply Management's index to its highest level in 20 months.
Auto sales, meanwhile, reached their highest level in five years in 2012 and are still rising. New car and truck sales rose 4 percent in February from a year earlier to an annual pace of 15.4 million. That's a big improvement from sales of only 10.4 million in 2009. It's still short of the pre-recession peak of 17 million in 2005. Auto makers are expected to have boosted output last month to keep up with the sales.
Manufacturers also stepped up hiring last month, adding 14,000 jobs. The industry has added 39,000 in just the past three months.
Increasing factory output is contributing to an improved outlook for the economy this year. Americans are spending more, despite higher Social Security taxes and a sharp increase in gas prices. Retail sales rose in February at a healthy pace.
The job market is also gaining steam. Employers have added more than 200,000 jobs per month in the past four months, nearly double the average last spring. That's pushed the unemployment rate down to a four-year low of 7.7 percent.
As a result many economists are more optimistic about growth in the January-March quarter. Joseph LaVorgna, chief economist at Deutsche Bank, raised his forecast for first quarter growth to an annual rate of 3 percent, up from only 1.5 percent.
Copyright 2013 The Associated Press.