US manufacturing shrinks

WASHINGTON -- U.S. manufacturing shrank in June for the first time in nearly three years, adding to signs that economic growth is weakening.

Production and exports declined, and the number of new orders plunged, according to a monthly report released Monday by the Institute for Supply Management.

The slowdown comes as U.S. employers have scaled back hiring, consumers have turned more cautious, Europe faces a recession and manufacturing has slowed in big countries like China.

"This is not good," said Dan Greenhaus, chief economic strategist at BTIG, an institutional brokerage. Though the report "does not mean recession for the broader economy, it is still a terribly weak number."

The trade group of purchasing managers said its index of manufacturing activity fell to 49.7. That's down from 53.5 in May. And it's the lowest reading since July 2009, a month after the Great Recession officially ended. Readings below 50 indicate contraction.

Economists said the manufacturing figures were consistent with growth at an annual rate of 1.5 percent or less. That would be down from the January-March quarter's already tepid annual pace of 1.9 percent.

"Our forecast that the U.S. will grow by around 2 percent this year is now looking a bit optimistic," said Paul Dales, an economist at Capital Economics.

Stocks fell sharply after the report was released at 10 a.m. But investors appeared to shake off the bad manufacturing news by the end of the day. The Dow Jones industrial average recovered most of its early losses to close down just 8.7 points at 12,871. And broader indexes ended the day up.

Most economists aren't yet predicting another recession. Though the ISM report suggests manufacturing is contracting, it typically takes a sustained reading below 43 to signal the economy isn't growing.

Still, U.S. manufacturing, which has helped drive growth since the recession ended, is faltering at a precarious time.

Americans have pulled back on spending, which drives roughly 70 percent of growth. Europe's economy is likely in recession, which has hurt U.S. exports.

And China's manufacturing sector grew in June at its slowest pace in seven months, according to a survey released Sunday by the state-affiliated China Federation of Logistics and Purchasing.

Manufacturing will likely stay weak for the next few months. The ISM's gauge of new orders, a measure of future activity, plunged from 60.1 to 47.8. That's the first time it has fallen below 50 since April 2009, when the economy was still in recession.

Fewer new orders reflect growing concerns of businesses. In addition to slower global growth and less spending by U.S. consumers, many companies worry that U.S. lawmakers won't extend a package of tax cuts at the end of the year.

Bricklin Dwyer, an economist at BNP Paribas, said the uncertainty "has left businesses unwilling to invest."

A gauge of production in the ISM's survey fell to its lowest level in more than three years.

U.S. factories are also reporting less overseas demand. A measure of exports dropped to 47.5, its lowest level since April 2009.

A gauge of employment edged down but remained at a healthy level of 56.6. That suggests factories may still be adding jobs. Manufacturers have reported job gains for eight straight months.

Overall hiring has slowed sharply this spring. Employers added an average of only 73,000 jobs per month in April and May. That's much lower than the average of 226,000 added in the first three months of this year. The unemployment rate rose in May to 8.2 percent from 8.1 percent, the first increase in a year.

Worries about slowing job growth are outweighing the benefits of lower gas prices. A measure of consumer confidence fell in June for the fourth straight month.

Slower job growth and falling confidence are weighing on consumers' willingness to spend. Americans cut back on purchases of autos and other long-lasting factory goods in May, the government said Friday.

The sharp drop in U.S. factory activity overshadowed more positive news on housing.

Construction spending rose 0.9 percent in May from April, the Commerce Department said in a separate report Monday. It was the second straight monthly increase, even though the level of spending still isn't healthy.

The increase was driven by a surge in residential construction. Home sales are up from the same month last year. Mortgage rates are at the lowest levels in history. And prices have begun to stabilize in most markets.

The economy could also get a boost this summer from lower gas prices, which have tumbled more than 60 cents per gallon since peaking in April. The result is that consumers have more money to spend on other goods, from autos and furniture to electronics and vacations, that fuel economic growth.

Kansas City.com

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satanic mills of Industrial Revolution take centre stage at Olympics opening ceremony

The £27million Olympics opening ceremony will feature smoke stacks, pits and steam power as it showcases Britain's industrial past, new aerial photographs suggest.

Danny Boyle is expected present a grim picture of Britain's satanic mills with a towering factory chimney the centrepiece of a scene showing off the country's coal-powered past.

The organisers have already revealed how they will show off cricket on the village green, dancing happily around the maypoles and singing for joy in the background. But they are expected to show a darker side to our past in the second scene.

The river snaking through the centre of London seems to resemble the aerial image of London in the EastEnders credits. But sprouting from the landscape are a selection of iconic images from the industrial past.

There appears to be a coalmine in the image, as well as a water wheel, a cauldron and a cotton loom in the ceremony.



A giant figure is positioned in the middle of the field which was still covered in tarpaulin when the picture was taken. The 80ft structure appears to be holding a staff or wand.

In front of the figure is the enormous factory chimney while behind it is is a huge metal cog, upon which are laid wooden sleepers, perhaps a reference to the steam age.

The ceremony, which is expected to be viewed by a global TV audience of more than a billion, will use more than 13,000 props while a million-watt amplifier will provide the sound.

Among the more unusual items on show are three enormous iron-framed beds, one of which has a pirate's hat and a hook lying on it which might indicate the use of the Captain Hook character from JM Barrie's Peter Pan. Among the 10,000 volunteers involved in the performance are a group of NHS nurses.


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Assad to Kremlin: I can finish the revolt in two months

In a phone call to the Kremlin Sunday, July 1, Syrian President Bashar Assad said he needed just two months to finish off the revolt against his regime. “My new military tactics are working,” he said in a secret video-conference with Russian intelligence and foreign ministry officials who shape Moscow’s policy on Syria.

Reporting this exclusively, DEBKAfile’s intelligence sources also register the fleeting life span of the new plan for ending the Syrian war which UN envoy Kofi Annan announced had been agreed at a multinational Action Group meeting in Geneva on Saturday, June 30. Within 24 hours, the principle of a national unity transitional government based on “mutual consent” was rejected by the regime and the Turkish-based opposition leaders alike, as the violence went into another month.

On the first day of July, 91 people were reported killed in the escalating Syrian violence after a record 4,000 in June.
The new military tactics to which Assad referred are disclosed here:
1. The sweeping removal of most of the veteran Syrian army commanders who led the 16-month bloody assault on regime opponents and rebels. They were sent home with full pay to make way for a new set of younger commanders, most of them drawn from the brutal Alawite Shabiha militia, which is the ruling family’s primary arm against its enemies.

The regular commanders had shown signs of fatigue and doubts about their ability to win Assad’s war. Their will to fight on was being badly sapped by the mounting numbers officers and men going over to the opposition camp in June.
One of the tasks set the new commanders is to stem the rate of defections.
To keep the veteran commanders from joining the renegades and reduce their susceptibility to hostile penetration, the officers were not sacked but retired on full pension plus all the perks of office, including official cars.

2. But a higher, unthinkable level of violence is the key to Assad’s “new tactics.” He has armed the new military chiefs with extra fire power - additional tank and artillery units, air force bombers and attack helicopters - for smashing pockets of resistance and unlimited permission to use it. Already the level of live fire used against the rebels has risen to an even more unthinkable level which explains the sharp escalation of deaths to an average of 120 per day.

On the Syrian-Turkish border, tensions continue to mount. Monday morning, Turkey was still pumping large-scale strength including tanks, antiaircraft and antitank guns, artillery, surface missiles and combat helicopters to the border region.

Saturday, half a dozen Turkish jets were scrambled to meet Syria helicopters approaching their common border.

In Tehran, Brig. Gen. Amir-Ali Hajizadeh, commander of Iran’s IRGC Aerospace Division, warned Ankara that if its troops ventured onto Syrian soil, their bases of departure would be destroyed. The threat was made during Hajizadeh’s announcement of a three-day missile exercise starting Monday in response to the European oil embargo. He reported that long-, medium- and short-range missiles would target “simulations of foreign bases in the northern Semnan Desert,” without mentioning any specific nation except Turkey.

DEBKA file

Iran to deploy subs in Caspian Sea

TEHRAN, Iran (AP) — A semiofficial Iranian news agency says Tehran plans to deploy submarines in the Caspian Sea.

The Saturday report by Fars quotes Adm. Abbas Zamini as saying Iran plans to deploy “light submarines” to the oil-rich sea that adjoins Iran, Russia, Kazakhstan, Turkmenistan and Azerbaijan. He did not elaborate.

Relations between Iran and Azerbaijan have soured in the past year. Iran accuses Azerbaijan of harboring anti-Iranian terrorists linked to Israel’s Mossad spy agency. Azerbaijan in return says Iran supports Islamist dissidents. Both countries deny each other’s charges.

Earlier this month Iran said it has begun the “initial stages” of designing nuclear-powered submarines.

Iran has domestically built several small submarines over the past years. It has recently overhauled one of the three non-nuclear Russian Kilo-class submarines it bought in the 1990s.

Times of Israel