The overall index, where readings above and below 50 indicate expansion and contraction, respectively, rose from 53.1 in December to 54.1 in January and, while this was slightly below consensus estimates, a jump in the new orders component from 54.8 to 57.6 compensated for that disappointment.

Not surprisingly (given the rise in new orders) backlog orders rose from 48.0 to 52.5, however, there were a few negatives as production fell from 58.9 to 55.7 and the employment index dipped from 54.8 to 54.3.

This is the first of three estimates for the period and marks the best growth rate in a year-and-a-half following a reading of 1.8 percent in the third quarter. But, don’t be surprised if the most recent data is revised lower since downward revisions have been the norm in recent quarters, the third quarter data starting out at a similar level – a 2.5 percent rate – when it was initially reported.

The bulk of the overall gain (more than 1.9 percentage points of the 2.8 percent figure) came from rising inventories and, since this category is subject to heavy revisions in the second estimate, there is more reason to think that GDP could be revised lower next month.

Personal consumption made a positive contribution of 1.5 percentage points, primarily the purchase of durable goods, and government spending subtracted 0.9 percentage points while net exports were a small negative.

Faster growth to close out 2011 ended a sluggish year as the economy grew by just 1.7 percent, down from 3.0 percent in 2010 after contraction in both 2008 and 2009.

Iceland’s journey from financial ruin to fledgling recovery is a case study in roads not taken and choices not made by other countries faced with calamity in recent years.

By the time the United States and Europe began to wrestle with the fallout of the global financial crisis in 2008, this tiny island nation was experiencing full-fledged meltdown. Its bloated banks failed. Its currency collapsed. The prime minister invoked God’s help, and protesters filled the streets.

Iceland did what the United States chose not to do — allow its biggest banks to fail and force foreign creditors to take a hike. It did what troubled European nations saddled with massive debts and tethered by the euro cannot do — allow its currency to remain weak, causing inflation but making its exports more desirable and its prices more attractive to tourists.

Three years later, the unemployment rate has fallen. Tourism has increased. The economy is growing. The government successfully raised money from investors in the summer for the first time since the crisis.

It’s tempting to conclude that this country of 318,000 people simply handled the crisis more adeptly than others, like a pick-your-own-ending book in which Icelanders chose correctly. There is a sliver of truth in that, but the full story is more complicated.

There’s much more to this report and it’s well worth reading in its entirety.

If nothing else, it should be interesting to see how Iceland is doing three, five, or ten years from now as compared to other Western nations. According to the latest data from The Economist, the Iceland economy has been booming lately, though, for some reason, projections for the New Year are very U.S.-like.

The new orders component rose from 56.7 to 57.7 and the drawdown in backlog orders improved, up from 45 to 48 while employment, production, imports, and exports gained.

Today, the Chinese services sector notched its weakest growth in three months and, after the central bank loosened bank reserve requirements last week after two years of tightening, policymakers fret that slowing growth could lead to social unrest. Amid daily calls by pundits for a “hard landing”, the LA Times reports that the planned economy is in trouble.

According to an official New China News Agency report published Saturday, China’s top security chief warned provincial officials to brace for unrest if financial conditions continue to deteriorate.

Zhou Yongkang, a member of China’s nine-person Politburo Standing Committee, said the country should focus on developing better social management -– a euphemism for control aimed at stamping out opposition and unrest.

“The Party and the government have always paid a lot of attention to social management … but it still cannot keep up with the changes in economic and social development,” Zhou reportedly said, using typically dense party jargon.

“Faced with the negative impact of the market economy, we still have not established a complete social-management system,” Zhou continued. “How to establish a social management with Chinese characteristics to suit the socialistic market economic system in China is the most pressing task we face today.”

With the labor market now showing some distress as the number of strikes and other protests escalates, income inequality is an increasingly important issue to workers with increasingly idle hands and this is not good news for the government.

This marks the 28th straight month of growth in manufacturing (recall that numbers above and below 50 indicate expansion and contraction, respectively), and the important new orders index indicated growth for the second month in row after three straight months of contraction, jumping 4.3 percentage points to 56.7 percent.

Production surged from 50.1 in October to 56.6 in November, but the employment index dipped from 53.5 to 51.8 and, in a sign that pricing pressure may have reached a bottom, the prices paid component rose from 41.0 to 45.0

The demographics of California today more closely resemble those of 1900 than of 1950: It is a mostly home-grown population, whose future depends on the children of immigrants and their children, said William Frey, a demographer and senior fellow at the Brookings Institution.

“We used to say California, here we come,” said Frey. “That now has flipped.”
…
It was a different world in the 1950s and ’60s, when roughly half of Californians were drawn from other states by jobs and by visions of crystalline blue skies in January and beach parties in September. The state’s shining image was burnished by a public relations machine that pushed attractive suburban real estate and a wide-open field for business.

As domestic immigration slowed between 1970 and 2000, foreign immigration filled in the gap. But since 2000, even the state’s once-growing immigrant population has been frozen at 27% of total residents. Since at least 2005, more residents have left California than arrived here from other states.

What they don’t say here is that, with little net inflows, the state’s demographics continue to be transformed by the relative birthrates of its citizens and one can only imagine what the place will look like when that process goes on for another 10, 20 or 30 years.

The latest take on the mood of the American consumer from Reuters and the University of Michigan shows that attitudes were virtually unchanged, the sentiment index falling from 64.2 in October to 64.1 in November. One-year inflation expectations were steady at 3.2 percent with the five-year inflation outlook rising one-tenth to 2.7 percent.

The overall revision was primarily due to a large drop in business inventories, from an advance estimate of +$5.4 billion last month to this month’s estimate of -$8.5 billion. The replacement of estimated inventory data with actual data during the second reading on GDP is often the cause for large revisions to the overall growth figure. In this case, inventories accounted for a change of -0.43 percentage points to GDP growth, nearly the entire revision.

Exports were revised upward and consumer spending was lower than previously reported as health care and housing/utility spending accounted for nearly half of real economic growth in Q3, contributing 0.61 percentage points and 0.38 percentage points, respectively.

I wonder how long it takes to make one of these. Obviously, things are sped up, but it probably helps if you can draw really fast to begin with…