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December factory, building figures look hopeful

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U.S. manufacturers ended 2011 with their best month of growth since late spring, and the struggling construction industry spent more on projects for the third time in four months.

The data, along with strong reports from both Asia's and Europe's largest economies, bolstered hopes that the economy is gaining momentum and helped both Wall Street and commodities markets start 2012 with a bang.

In the U.S., factories hired more workers in December, saw the most growth in new orders since April and ramped up production. U.S. builders spent more in November on single-family homes, apartments and remodeling projects.

The Institute for Supply Management, a trade group of purchasing managers, said its manufacturing index rose to 53.9 from 52.7 in November. Readings above 50 indicate expansion.

The Commerce Department said spending on construction projects rose 1.2 percent in November to a seasonally adjusted annual rate of $807.1 billion.

And while that was the largest increase since a 2.2 percent rise in August, it's also barely half the $1.5 trillion economists consider healthy. Spending jumped 9.5 percent on home improvement projects in November. It rose 1.5 percent on single-family-home construction and gained 1.3 percent on apartment building.

The strong reports correspond with other positive signs for the U.S. economy - higher consumer confidence, tumbling unemployment benefit applications, and the unemployment rate falling to a 3 1/2-year low.

"The trend for the U.S. economy is most decidedly to the upside," said Dan Greenhaus, an analyst at the brokerage firm BTIG LLC in New York.

Other good economic news flowed in from around the world Tuesday - China and India each reported that its manufacturing had increased, and German unemployment fell to 6.6 percent, a two-decade low - and the markets responded.

The Dow Jones industrial average closed up 180 points, or 1.5 percent, at 12,397 Tuesday; the Standard & Poor's 500 rose 19 points, or 1.6 percent, at 1,277; and the Nasdaq rose 44, 1.7 percent, to 2,649.

The positive news also helped commodity prices jump across the board Tuesday - silver ended up 5.9 percent, gold increased 2.2 percent, oil jumped 4.2 percent, and corn rose nearly 2 percent.

Economists still caution that Europe's debt crisis likely will slow global growth in the first half of the year, but the December ISM survey showed many factories have largely recovered from their slump earlier this year.

Exports rose despite the trouble in Europe. Growth in new orders means output likely will increase in the coming months. And U.S. factories hired last month at the fastest pace since June, an optimistic sign ahead of Friday's important measure of job growth in December.

"All in all, an upbeat report," said Peter Newland, an economist at Barclays Capital, who noted that the stronger manufacturing activity should contribute to faster economic growth in the October-December quarter.

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