Factories Finally Hiring As Growth Speeds Up In Aug. Chicago Survey Consumer Outlays Up 0.8% Tax cuts and refinancings fattened wallets in July; what fuels spending now?(A)

Byline: JED GRAHAM

Chicago-area factories, racing to keep up with demand, added workers in August for the first time in 40 months, the National Association of Purchasing Management-Chicago reported Friday.

The association's business survey index rose to 58.9 from 55.9 in July, indicating factory activity expanded for the fourth straight month and at the fastest pace since May '02.

Separately, consumer spending in July rose a healthy 0.8% as disposable income surged 1.5%, largely thanks to tax cuts and despite no wage growth in the month, the Commerce Department said. Total income rose 0.2%.

These reports, adding to evidence of strong consumer spending in August, reflect an economy that's taking off in the third quarter on the back of monetary and fiscal stimulus.

"The summer is ending with an economic bang," wrote Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson. "It now appears that real GDP growth in the July-September quarter could rise above 6%."

Broad Factory Strength