China Manufacturing Slump Continues

By: Charles Riley, CNNMoney Activity in China’s factory sector continued to slide last month, bringing more bad news for the country’s political class as they prepare for a once-a-decade leadership transition. The Chinese government said Monday that its official manufacturing index hit 49.8 in September, up from 49.2 in August. Any reading below 50 indicates that factory activity is shrinking rather than growing. On Saturday, a closely-followed report by bank HSBC said that new export orders declined last month at their sharpest rate in three-and-a-half years due to weaker international demand. The fate of manufacturing in China is considered a barometer of the global economy because of the country’s role as a powerhouse exporter. Several economists have recently cut their growth forecasts for China to the mid 7% range. China’s economy had been growing around 10% for the past few years. And China’s benchmark stock index, the Shanghai Composite, is near multi-year lows. China’s central bank has already lowered interest rates twice this year in an attempt to accelerate growth. The Chinese government also recently announced a plan to spend more than $150 billion on transportation and other infrastructure projects. Analysts have suggested that the latest round of disappointing economic news will increase pressure on policymakers to pursue stimulus measures. But China’s government will soon undergo a major transition in the coming months, a once-in-a-decade move that will reshape the leadership of the Communist Party. It is unclear if China will announce any more significant stimulus measures until the new leaders are in...

U.S. Manufacturing Increases in September for First Time Since May

By: Leah Schnurr, Reuters The U.S. manufacturing sector expanded in September for the first time since May as new orders and employment picked up, an industry report showed on Monday. The Institute for Supply Management said its index of national factory activity rose to 51.5 from 49.6 in August, topping expectations in a Reuters poll for 49.7. It was the first time since May that the index has been above the 50 threshold that indicates expansion in the sector. The forward-looking new orders gauge also rose to its highest level since May at 52.3 from 47.1, while employment gained to 54.7 from 51.6. “We’re not quite at the point where things are good, but this indicates strongly that things are not so bad,” said Adam Sarhan, chief executive of Sarhan Capital in New York. U.S. stocks extended their advance immediately after the data, while Treasuries erased gains and the euro hit a session high against the dollar. Still, the rate of growth was modest and some components remained in contraction territory. Exports continued to shrink, though the rate of contraction was not as severe with the index rising to 48.5 from 47. Similarly, production rose to 49.5 from 47.2. After helping support the U.S. economic recovery, manufacturing has faltered in recent months, stung by weaker growth in China and the on-going uncertainty surrounding the euro zone debt crisis. A different manufacturing survey from Markit showed the sector closed out its worst quarter in three years as foreign demand for U.S. goods fell sharply. The U.S. economy grew at a 1.3 percent rate in the second quarter and most analysts expect growth will remain sluggish, though the economy should escape another contraction. In a positive sign for the economy, separate data showed lending to small businesses rose in August for a second straight...

Durable Goods Drop Worst Since Recession

By: Lucia Mutikani, Reuters New orders for long-lasting U.S. manufactured goods in August fell by the most in 3-1/2 years, pointing to a sharp slowdown in factory activity even as a gauge of planned business spending rebounded. The Commerce Department said on Thursday durable goods orders dived 13.2 percent, the largest drop since January 2009, when the economy was in the throes of a recession. Orders for July were revised down to show a 3.3 percent increase instead of the previously reported 4.1 percent gain. Economists polled by Reuters had expected orders for durable goods — items from toasters to aircraft that are meant to last at least three years — to fall 5 percent. Last month, the drop in orders reflected weak aircraft and automobiles demand. Boeing received only one aircraft order in August, down from 260 in July, according to information posted on the plane maker’s website. Transportation equipment tumbled 34.9 percent after racing ahead 13.1 percent in July. Excluding transportation, orders fell 1.6 percent after dropping 1.3 percent the prior month. Economists had expected this category to rise 0.3 percent after a previously reported 0.6 percent fall. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.1 percent, halting two straight months of hefty declines. That was above economists’ expectations for 0.5 percent gain. But shipments of these goods, which are used to calculate equipment and software spending in the gross domestic product report, fell 0.9 percent after declining 1.1 percent in July. The weakness suggested third-quarter economic growth would probably not improve much from the April-June’s 1.3 percent annual pace. Manufacturing, which has been the main driver of the recovery from the 2007-09 recession, has been hit by turbulence from sluggish domestic and global demand. Fears that the U.S. Congress could fail to avert a “fiscal cliff” — the $500 billion or so in expiring tax cuts and government spending reductions set to take hold in 2013 — have also left businesses with little incentive to boost...