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Signs of recovery in US economy

US manufacturing activity contracted in January for a fourth straight month. Factories grappled with a strong dollar and lower oil prices forced energy firms to further cut spending, but the pace of the decline appeared to be slowing. Consumer spending was flat in December, but a jump in savings to a three-year high offered hope that consumption would rebound in the coming months.

The buoyant dollar has combined with tepid global demand to undermine US exports. At the same time, businesses are working to reduce a huge pile of unsold merchandise that’s clogging warehouses, which has left little scope to place new orders with factories.

But there are rays of hope for the sector, which accounts for 12 per cent of the economy. Last month, more factories reported an increase in orders and production. In addition, inventory levels and order books appeared to be stabilising. Consumer spending was unchanged in December after increasing 0.5 per cent in November. Spending on long-lasting manufactured goods such as autos dropped 0.9 per cent. Purchases of nondurable goods, including apparel, also fell 0.9 per cent.

Consumer spending, which accounts for more than two-thirds of US economic activity, increased 3.4 per cent in 2015 after advancing 4.2 per cent in 2014.