Signs of revival on the factory floor emerged in the United States and Asia on Monday, fueling exultant buying on Wall Street and reinforcing a sense that genuine economic recovery was unfolding.
An auto factory in Shanghai. The Chinese economy expanded at a rapid pace in December.
But if the Great Recession has indeed relaxed its grip on American life, it has been replaced by something that might be called the Great Ambiguity — a time of considerable debate over the clarity of economic indicators and the staying power of apparent improvements.
Manufacturing expanded in the United States in December, the fifth straight month of gains, amplifying hopes that a job market hobbled by double-digit unemployment might finally be adding paychecks. New jobless claims slipped markedly last week. Some economists think data to be released on Friday will show the economy gained jobs in December, the first monthly net increase in two years.
“We’re really coming back,” said Allen Sinai, chief global economist at the research firm Decision Economics. “The expansion is picking up the pace.”
Investors pushed up stock prices, with the Dow Jones industrial average gaining 156 points, or 1.5 percent, and oil prices reaching a 14-month high, $81.51 a barrel. [Pages B1 and B8.]
But many economists remain worried that momentum could soon weaken, with the economy sliding back into glum times.
Indeed, the only area in which economists can reliably declare expansion is in the supply of competing narratives about the economy — perhaps to be expected in any transition between downturn and the inevitable turn for better.
“That is always the nature of the boomlet after recession,” Mr. Sinai said. “People think it’s going to fade away.”
Much of the improvement in manufacturing — a small slice of the American economy — is the result of businesses rebuilding inventories after slashing them. The economy has also been stoked by $787 billion in federal spending aimed at stimulating growth, a force that will be largely exhausted by the middle of the year.
Those skeptical of lasting recovery assert that, once businesses have rebuilt inventories and federal largess runs dry, the economy will confront the same assortment of ills plaguing it for two years.
Namely, Americans are saturated in debt and nervous about job prospects, prompting many to hunker down in a mode of thrift; businesses still spooked by dysfunction in the financial system are reluctant to hire more workers until recovery proves real; and a cataclysmic drop in home prices has diminished spending power in millions of households, with another decline possible as foreclosed properties surge onto the market.
“You come back to the unfortunate reality that the underlying problems are still very much there,” said Joshua Shapiro, chief United States economist at the market research firm MFR Inc. “It’s going to be a long grind.”
Few economists expect a double-dip recession, in which the economy begins to expand only to contract again, but many fear a protracted period of stagnant growth that could last several years, much like Japan’s Lost Decade in the 1990s following the calamitous end to an era of excessive real estate speculation.
Indeed, some liken signs of improvement in the American economy to events in Japan, where victory was often prematurely declared.
“Japan had lots of upswings,” said Stephen King, global chief economist at the banking conglomerate HSBC in London.
Mr. King foresees a long period of adjustment to slower rates of economic growth in the United States.
The American economy expanded at a roughly 3 percent annual pace through most of the 1980s and 1990s, then dipped to about 2.5 percent from 2003 to 2007, and most of the gains stemmed from the disastrous investment bubble in real estate.
“What are you left with in terms of underlying growth?” he asked. “The answer is, not very much.”
But economists of a more optimistic type assert that such views fail to account for what has been happening in recent months. Areas of the economy that went into deep freeze have revived and must grow just to replenish their inventories.
Exhibit A in this narrative is the widely watched index of manufacturing activity produced by the Institute for Supply Management, which reported on Monday increasingly robust orders and production at American factories in December.
The purchasing manager’s index rose to 55.9, its highest level since April 2006, back in the days before subprime entered the American lexicon and before economists began to fret about a potential replay of the Great Depression.Hopes for a lasting recovery were also bolstered by news from China, where data released Monday showed its economy expanded in December at a faster clip than at any time since the beginning of the global downturn. Similar data amplified evidence of recovery in South Korea, India and Taiwan.
“Strong growth in Asia reverberates around the world and helps U.S. exports,” Mr. Sinai said.
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