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US Economic Growth to Accelerate in 2014

By Elliott H. Gue on Dec. 24, 2013

US gross domestic product (GDP) should expand at a rate of almost 3 percent next year–a welcome improvement from the 1.7 percent growth rate expected in 2013.

Although the US still faces plenty of challenges over the long term, investors shouldn’t ignore the private sector’s recent signs of strength. Case in Point: The Institute for Supply Management’s Purchasing Managers Index (PMI) for the manufacturing sector stands at 57.3, its highest reading since April 2011.

The PMI for the manufacturing sector has a long history as a reliable gauge of the economy’s health. PMI readings greater than 50 indicate an expansion in activity, while index values below this inflection point suggest a contraction.

Even better, the index’s new orders component came in at 63.6 in November–one of the highest readings since the US economic recovery began in 2009. Such an elevated reading bodes well for economic growth in the new year and suggests that US manufacturers will ramp up output to meet demand for new orders.

We also watch the Conference Board’s Index of Leading Economic Indicators (LEI) for insight into the economy’s health and future direction.

Here’s a quick rundown of the LEI components and their implications for the US economy and investors.

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