The US economy has started to show signs of growth as business expanded at a faster pace than expected in July. Major manufacturers like Caterpillar Inc. is forecasting a rise in earnings following the demand from developing countries.

Jim O’Sullivan, chief economist at MF Global Ltd. Says, “Export growth is still pretty strong and domestic demand has shown some gains.”  According to a Commerce Department report, growth slowed in the second quarter to a 2.4 percent annual rate that is much less than the forecast.

Slowing Economy
GDP increased and showed 3.7 percent in the first quarter compared to a forecast of 2.6 percent surveyed by Bloomberg.  Since 1997, business investment climbed at the fastest rate.

Following the reports, stocks jumped to erase previous losses.  The S&P 500 Index rose 0.1 percent to 1,102.34 at 11:04 a.m. in New York.  The treasury climbed pushing two year yields to 2 basis points, a  0.02 percentage point, to 0.57 percent.  The Thomson Reuters/University of Michigan final index fell to 76 compared with a preliminary July measure of 66.5.  Economists suggest that the Chicago group’s gauge would fall to 56.

Employment gauge rising
The Employment production gauge increased to 65 from 64.2 and employment measure rose to 56.6 from 54.2.  The inventory gauge rose to 50.8 from 46.5.  The New orders gauge climbed to 64.6 from 59.1.  The backlogs index rose 57.6 from 50.7.  Economists are eyeing the Chicago index along with other regional manufacturing reports.  Chicago has membership of both manufacturers and service providers that makes the gauge of measure for overall growth.

National Indices
According to median forecast of economists, the ISM’s monthly national factory index may drop to 54.2 in July to 56.2 the previous month.  The index averaged 53.9 in five years.  Caterpillar has raised its earning forecasts in developing countries for sectors like mining, energy and rail equipment.
Ed Rapp, officer at Peoria, an Illinois-based company, says, “You’ve got strong growth in India and China that provides demand for commodities. Most of the mining is happening in the developing parts of the world.”

Top economists see the beginning of an economic recovery but say high unemployment will continue through 2010, according to a July survey of 49 economists by USAToday.

The majority of the economists surveyed predicted the jobless rate will top 10 percent later this year. Unemployment figures released on Aug. 7 showed a slight decrease of 9.4 percent in July from 9.5 percent in June – the first time unemployment dipped in 15 months.

Economists told USAToday recovery will be “anemic” due in large part to massive consumer debt and a tight credit market. They did cite a few bright spots, though, with the majority saying existing home sales have bottomed out, consumer spending stabilized and CEO confidence growing.