Businesses spending more and firing less

Associated Press

WASHINGTON

Businesses are growing more confident in the economy, investing in more equipment and laying off fewer workers.

Government figures on manufacturing and unemployment claims released Thursday raised hopes on the eve of a report on how much the economy grew in the October-December quarter.

Still, 2011 ended up as the worst year on record for new-home sales, a reminder that the economy has a long way to go.

“Business optimism seems to be picking up, which is critical to the growth and competitiveness of the U.S. economy over the long haul,” said Diane Swonk, chief economist at Mesirow Financial.

Orders for manufactured goods expected to last at least three years rose 3 percent last month, the Commerce Department said. And demand for goods that indicate business investment plans hit an all-time high.

A tax break that expired in December for large equipment purchases may have helped boost orders. Still, many economists said most companies likely are buying equipment simply because business is improving.

Manufacturers “have a real need to ramp up their spending on capital improvements ... because the economy is growing, and industrial capacity has not kept up,” said Carl Riccadonna, an economist at Deutsche Bank.

In December, orders for core capital goods rose to a record $68.9 billion. That’s more than 45 percent higher than the recession low hit in April 2009.