Visits to U.S. stores, restaurants stall as concern over economic recovery grows By Reuters


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© Reuters. FILE PHOTO: Bubble tents are set up outside Cafe Du Soliel following the outbreak of the coronavirus disease (COVID-19) in the Manhattan borough of New York City

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By Howard Schneider

WASHINGTON (Reuters) – Foot traffic to U.S. restaurants and stores showed little improvement last week, high frequency data show, and signs emerged of deepening stress for small businesses as economists worry the recovery from coronavirus lockdowns continues to slow.

After steady growth over the summer, estimates of seated diners at restaurants maintained by booking site OpenTable https://www.opentable.com/state-of-industry fell for the second week. They remain at about 60% of levels in early March before a national state of emergency was declared to combat the spread of the coronavirus.

(Graphic: Retail in real time – https://graphics.reuters.com/USA-ECONOMY/REOPEN/yzdvxxyzlvx/chart.png)

Employee records on 55,000 small businesses maintained by Homebase https://joinhomebase.com/data showed the number of people working declined for a second week in a row.

Data from cellphone tracking firm Unacast https://www.unacast.com/covid19/covid-19-retail-impact-scoreboard shows that the gradual return to restaurants, gyms and other “close contact” businesses has largely stalled following improvement over the summer.

(Graphic: Employment in real time – https://graphics.reuters.com/USA-ECONOMY/REOPENING/gjnvwxamxpw/chart.png)

Many U.S. businesses tapped federal programs for help early in the pandemic, but with the health crisis now likely to extend into next year, the stress may be too much.

Recent surveys from small business networking group Alignable and online review site Yelp (NYSE:) both suggested a looming jump in small firm failures.

“The impact has been too deep for too long. And it’s taking its toll,” Alignable spokesman Chuck Casto said, after the group’s poll of more than 6,300 small businesses, released Wednesday, found more then 40% expect they won’t earn enough revenue through the end of the year to stay in business.

That finding is consistent with recent U.S. Census surveys of small businesses showing a decline in September in the percentage of firms that had enough cash on hand for more than a month of operation.

The fate of the United States’ roughly 6 million small businesses will shape the broader contours of the recovery and the economy that emerges after the pandemic.

It will be particularly critical to sustain job growth. U.S. firms with fewer than 500 workers employed around 60 million as of 2017, according to Census data.

Some economic policymakers worry that the larger-than-expected job gains from May through August will mark the high point of the recovery. The economy clawed back about half of the 22 million positions lost in the spring’s pandemic shut down, but few expect that pace to continue. Jobless claims unexpectedly increased https://ca.reuters.com/article/us-usa-economy-idCAKCN26F249 for the week ending Sept. 19, Labor Department data released Thursday show.

After hitting a pandemic-era high of 14.7% in April, the unemployment rate fell to 8.4% in August. But at the most recent Federal Reserve meeting even the most optimistic policymaker projected slower improvement, with the rate still 6.5% by year’s end. The median projection called for less than a percentage point improvement from here.

New weekly job postings aggregated by economic consulting firm Chmura http://www.chmuraecon.com/blog from online employment firms and company websites have remained at roughly 90% of their pre-pandemic level in recent weeks – a sign of steady but not surging momentum in hiring.

By some high frequency measures, however, the economic rebound continues apace. Data from cellphone tracking firm Safegraph https://www.safegraph.com/dashboard/covid19-commerce-patterns showed foot traffic at retail locations overall is near its March level.

Sectors including manufacturing and housing have made steady progress. Data from time management firm UKG https://www.kronos.com/about-us/newsroom/update-us-workforce-activity showed that shifts worked across a variety of industries grew an average of 1.1% weekly so far in September after that figure dipped as low as 0.5% in August.

But that data also showed a divided recovery. Shifts worked at manufacturing firms for the week ending Sept. 20 were just 1% below the average from January through March. Retail firms were down by 10%.

Larger firms are “starting to dramatically outpace smaller businesses,” in terms of labor pickup, said Dave Gilbertson, vice president of strategy and operations at UKG, with firms above 5,000 workers adding shifts at a rate of 3% per week, while growth among firms with fewer than 100 employees was less than 1%.

Measures of the broader national recovery have shown no clear direction for several weeks. An Oxford http://blog.oxfordeconomics.com/topic/recovery-tracker economics index combining health, economic and social data for the last four weeks has remained at about 80% of January’s level.

(Graphic: Oxford Economics Recovery Index – https://graphics.reuters.com/USA-ECONOMY/OXFORDINDEX/rlgpdlnyepo/chart.png)

As federal unemployment and other benefits start to diminish, “the situation isn’t sustainable without stronger gains in employment,” said Oxford chief economist Gregory Daco.



U.S. weekly jobless claims increase; labor market recovery slowing By Reuters


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© Reuters. FILE PHOTO: People wait outside Kentucky Career Center in Frankfort

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By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits unexpectedly increased last week, supporting views the economic recovery from the COVID-19 pandemic was running out of steam amid diminishing government funding.

The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed 26 million people were on unemployment benefits in early September as the jobs market struggles to heal as the coronavirus crisis rages on.

Federal Reserve Chair Jerome Powell told lawmakers on Wednesday that Congress and the U.S. central bank needed to “stay with it” in working to support the economy’s recovery.

Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 870,000 for the week ended Sept. 19, compared to 866,000 in the prior week. Data for the prior week was revised to show 6,000 more applications received than previously reported. Economists polled by Reuters had forecast 840,000 applications in the latest week.

Unadjusted claims increased 28,527 to 824,542 last week. Economists prefer the unadjusted claims number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the coronavirus crisis.

Six months after the pandemic started in the United States, jobless claims remain above their 665,000 peak during the 2007-09 Great Recession, though applications have dropped from a record 6.867 million at the end of March.

While the reopening of businesses in May boosted activity, demand in the services industries has remained lackluster, keeping layoffs elevated. Job cuts have also spread to industries such as financial services and technology that were not initially impacted by the mandated business closures in mid-March because of insufficient demand.

U.S. stock index futures extended losses on the claims data. The dollar was trading higher against a basket of currencies. U.S. Treasury prices rose.

STALLED PROGRESS

A total 630,080 applications were received for the government-funded pandemic unemployment assistance last week. The PUA is for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs. Altogether, 1.5 million people filed claims last week.

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 167,000 to 12.58 million in the week ending Sept. 12.

Economists believe the so-called continuing claims are declining as people exhaust their eligibility for benefits, which are limited to 26 weeks in most states.

The continuing claims data covered the period during which the government surveyed households for September’ unemployment rate. The decline in mid-September implied a further decrease in the unemployment rate from 8.4% in August.

The Fed has cut interest rates to near zero and vowed to keep borrowing costs low for a while, and has also been pumping money into the economy. Government money to help businesses has virtually dried up. Tens of thousands of airline workers are facing layoffs or furloughs next month unless the White House and Congress provide another rescue package.

A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, whose funding is already running out. New coronavirus cases have been rising recently and the death toll in the country topped 200,000 on Tuesday – by far the highest number of any nation.

The ebbing fiscal stimulus and persistent coronavirus infections are already restraining the economy after activity rebounded sharply over the summer. Retail sales and production at factories moderated in August. Business activity cooled in September, reports have shown.



China’s slow consumption recovery upset by wary low-income households By Reuters



© Reuters. Woman wearing a face mask following the coronavirus disease (COVID-19) outbreak walks past a residential compound in Beijing

By Sophie Yu, Gabriel Crossley and Yawen Chen

BEIJING (Reuters) – Months after China brought its coronavirus epidemic under control, its consumers are slowly opening their wallets again – but the hard days of lockdowns still weigh on many shellshocked lower-income households, who prefer to hold on to their cash.

While China’s recovery from a record first quarter contraction is well ahead of most other countries, it has been uneven. Lingering weakness in consumption could complicate President Xi Jinping’s push to curb the country’s dependence on volatile overseas markets.

Factories rebounded relatively quickly from paralysing lockdowns, but consumer confidence has picked up only gradually in the world’s second-largest economy.

It took until August before retail sales finally returned to growth, rising 0.5% on-year. Sales for the first eight months were 8.6% lower than the same period last year.

But while spending on luxury goods like Prada (OTC:) bags (HK:) quickly shook off the virus shock, consumption of daily necessities and services is recovering more slowly. Extra caution from lower-income households is a key reason why, say analysts.

“We live on savings but it’s difficult, we tried to buy only the necessities,” said Zhou Ran, a self-employed decorator in central Henan’s Xinxiang city who couldn’t work for four months earlier this year amid lockdowns.

Sales of clothing and shoes remain down 15% over the first eight months, while fuel and other petroleum product sales are down 17.3%. Incomes from food and beverage sales fell over 26% in this period.

SHOCKED SPENDERS

Analysts will be closely watching data and company sales reports from China’s “Golden Week” holidays on Oct. 1-8 to gauge how quickly consumers’ mood is improving.

Though Zhou returned to work in May, business was hard to find. “Many people prefer to keep cash for now so they delay renovations,” he said.

“It is difficult for everyone this year,” said Zhou, whose wife takes care of their three children and doesn’t have an income.

A quarterly report issued jointly by the research arm of Alibaba-backed Ant Group and Southwestern University of Finance and Economics showed the vulnerability of low income families to the epidemic.

Most households with annual incomes below 100,000 yuan ($14,800) reported their wealth declined in the first and second quarters. Those with incomes above 300,000 yuan reported consistent gains.

“Higher-income households have probably built up savings, because of the forced reduction in consumption during lockdown, and could now be ready for a spending spree,” said Wei He, an analyst at research firm Gavekal Dragonomics, in a note.

“It is lower-income households that face a longer slog of normalizing their finances,” he said.

JD (NASDAQ:).com data shows that consumption growth in lower-tier cities and low-income groups was weaker than in major cities and high-income groups in June, reversing the usual trend, according to Shen Jianguang, chief economist at JD Digits, the Chinese e-commerce giant’s fintech arm.

This is likely because the small and medium-sized enterprises which employ many lower-income people were affected more by the epidemic, Shen said in an article published August.

The impact on consumption could be considerable. Some 600 million Chinese people earn a monthly income of barely 1,000 yuan, according to Premier Li Keqiang, speaking in May. That would be over 40% of the country’s population.

Beijing has issued a slew of policies to stabilize jobs and support spending over the last months. Local authorities and companies have, for instance, handed out billions of yuan in shopping vouchers.

ANY PORT IN A STORM

To be sure, China’s recovery, as imbalanced as it is, is still a bright spot in global consumption as other major economies battle a second wave of infections and in some cases impose fresh curbs on activity.

Many in China’s vast export-oriented sector have turned to the domestic market as foreign orders dry up, with enthusiastic government support.

An app from Alibaba (NYSE:) Holding Group Ltd which helps manufacturing suppliers sell directly to domestic consumers has seen 1.2 million companies sign up since its launch in March. Nearly half were export-focused previously, according to an Alibaba spokesperson.

Domestic orders now make up 40% of total orders for Tu Xinye, the manager of a company that makes toothbrushes in southern Jiangsu province.

That’s up from just 10% in the past, and overall sales volume has returned to 90% of pre-COVID levels, he said.

But while Chinese consumers made up for the company’s shrinking overseas orders this year, they also create new challenges, said Tu.

Competition is fiercer at home than in the bigger “blue ocean” export market, and Chinese buyers also like different kinds of toothbrushes – with softer bristles and smaller handles.

Tu’s company’s relative success has been an outlier in his town. Many smaller companies there have collapsed, and Tu is now in the process of acquiring a competitor.

“Times of crisis are also times when there’s some economic reshuffling,” he said.



Argentina jobless rate hits 16-year high amid pandemic, lockdown By Reuters




By Jorge Iorio

BUENOS AIRES (Reuters) – Argentina’s unemployment rate jumped to 13.1% in the second quarter of the year as the country was swiped by the coronavirus pandemic, the official statistics agency said on Wednesday, the highest since 2004 and up from 10.4% in the previous quarter.

Argentina imposed a strict lockdown in mid-March, hitting an already shaky economy in recession since 2018 and leaving many businesses struggling to survive. The country now has over 650,000 confirmed cases of COVID-19.

“The (unemployment) numbers largely reflect the impact on labor market dynamics from the COVID-19 pandemic and from the restrictions on certain activities and movement,” Argentina’s INDEC statistics body said in a report.

The agency said the sectors hardest hit included construction, hotels and restaurants and domestic services.

The South American grains producer, which is just emerging from default on its foreign debt, needs to revive its economy and get people back to work to stave off a sharp increase in poverty and to refill depleted government coffers.

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South Korea August jobless rate logs fastest monthly drop since 1999 By Reuters



© Reuters. Men look at recruiting information during a job fair in Seoul

SEOUL (Reuters) – South Korea’s unemployment rate dropped in August by the sharpest monthly decline since 1999 as more people stopped looking for work amid the coronavirus pandemic and floods.

The seasonally adjusted unemployment rate declined to 3.2% in August, down one full percentage point from 4.2% in July, data from Statistics Korea showed on Wednesday.

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Singapore’s deflation extends to seventh month in core gauge By Reuters



© Reuters. A woman pushes a shopping cart at a supermarket in Singapore

SINGAPORE (Reuters) – Singapore’s main price gauge contracted for the seventh consecutive month in August, data showed on Wednesday, with prices falling 0.3% from a year earlier.

Core inflation – the central bank’s favoured price measure – was expected to fall 0.4% based on eight economists’ forecasts. The gauge had fallen 0.4% in July after entering negative territory in February for the first time in a decade.

Singapore’s headline consumer price index was down 0.4% from a year earlier, unchanged from the prior month, data from the trade ministry and the Monetary Authority of Singapore showed. Economists had forecast a 0.5% drop.

Authorities in the city-state, battling its deepest ever recession due to the COVID-19 pandemic, expect core and headline inflation to average between -1% and 0% in 2020.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



U.S. existing home sales approach 14-year high; prices scale record peak By Reuters


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© Reuters. A house-for-sale sign inside the Washington DC Beltway in Annandale Virginia

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By Lucia Mutikani

WASHINGTON (Reuters) – U.S. home sales surged to their highest level in nearly 14 years in August as the housing market continued to outperform the overall economy, but record high home prices could squeeze first-time buyers out of the market.

The report from the National Association of Realtors confirmed home sales had recovered after slumping when the economy almost ground to a halt as businesses were shuttered in mid-March in an effort to slow the spread of COVID-19.

Demand for housing is being fueled by record-low mortgage rates and a pandemic-fueled migration to suburbs and low-density areas in search of more spacious accommodation as many people work from home. Federal Reserve Chair Jerome Powell told a congressional panel on Tuesday that the economy has shown “marked improvement” since plunging into recession in February, though the path ahead remains uncertain.

“The housing market has continued its remarkable recovery amidst an otherwise fraught economy that has been battered by the pandemic,” said John Pataky, executive vice president at TIAA Bank in Jacksonville, Florida.

“However, we should continue to be paranoid about the sustainability of sales. With lack of housing supply, there is an upward pressure on home prices which threatens to detract the benefits accrued from low mortgage rates.”

  Existing home sales increased 2.4% to a seasonally adjusted annual rate of 6 million units last month, the highest level since December 2006. August’s increase in homes sales, which marked three straight months of gains, was in line with economists’ expectations.

The median existing house price jumped 11.4% from a year ago to a record $310,600 in August. Sales last month were concentrated in the $250,000 to $1 million and over price range, with transactions below the $250,000 price band down sharply.

Existing home sales, which account for the bulk of U.S. home sales, jumped 10.5% on a year-on-year basis in August.

The PHLX housing index increased more than 1.5%, outpacing a broadly firmer U.S. stock market. The dollar rose against a basket of currencies. U.S. Treasury prices were down.

TIGHT INVENTORY

Though the coronavirus crisis has left nearly 30 million people on unemployment benefits, joblessness has disproportionately affected low-wage workers in the services sector, who are typically young and renters.

Home sales rose in all four regions last month. Demand for housing was skewed toward single-family homes as people sought larger spaces for home offices and schooling. The NAR reckons the migration to suburbs from city centers could become permanent even if a vaccine is developed for the respiratory illness.

Single-family home sales advanced 1.7% in August. While multi-family home sales increased 8.6%, they accounted for 10.5% of sales, down from the 12% that is considered the norm for the housing market.

The 30-year fixed mortgage rate is around an average of 2.87%, according to data from mortgage finance agency Freddie Mac (OTC:). A persistent shortage of homes for sale and August’s double-digit house price inflation growth are red flags.

The shortage is concentrated in the single-family housing segment. Though single-family builders’ confidence hit a record high this month and permits for single-family home construction jumped in August to their highest level since May 2007, the supply squeeze is unlikely to ease as fires in the West have boosted lumber prices.

There were 1.49 million previously owned homes on the market in August, down 18.6% from a year ago. At August’s sales pace, it would take 3.0 months to exhaust the current inventory, down from 3.1 months in July and 4.0 months a year ago.

A six-to-seven-month supply is viewed as a healthy balance between supply and demand.

“The 11% gain in prices is far above income growth and threatens overall affordability especially for first-time buyers,” said Joel Kan an economist at the Mortgage Bankers Association in Washington. “It’s clear that more inventory is needed to keep home prices from rising too quickly.”

Last month, houses for sale typically stayed on the market for 22 days, matching July, but down from 31 days in August 2019. Sixty-nine percent of homes sold in August were on the market for less than a month. According to the NAR, realtors were reporting multiple bids for houses on the market.

First-time buyers accounted for 33% of sales in August, down from 34% in July 2020, but up from 31% in August 2019. Individual investors or second-home buyers, who account for many cash sales, bought 14% of homes in August. All-cash sales accounted for 18% of transactions.



Japan’s households, firms keep hoarding cash at record pace as COVID-19 strains broaden By Reuters



© Reuters. Outbreak of the coronavirus disease (COVID-19) in Tokyo

By Leika Kihara

TOKYO (Reuters) – Japan’s currency in circulation and bank deposits rose at a record annual pace in August as companies and households continued to pile up cash to guard against the coronavirus- driven income slump, central bank data showed on Wednesday.

The data underlines the difficulty of prodding companies and households to start spending again, even as the economy gradually re-opens after lockdown measures were lifted in May.

Japan’s M3 money stock – or currency in circulation and deposits at financial institutions – rose 7.1% in August from a year earlier, marking the biggest increase since comparable data became available in 2004, Bank of Japan data showed. The rise topped a 6.5% gain in July.

Bank deposits surged a record 15.3% in August from a year earlier, as the hit to sales from COVID-19 prompted companies to continue to hoard cash as a precaution.

Cash in circulation rose 5.5% in August, matching the pace of gain in July, the data showed.

“Some households may be holding cash at home instead of parking them in bank accounts, as the pandemic makes them cautious of visiting bank branches, a BOJ official told a briefing.

Japan’s economy sank deeper into its worst postwar contraction in the second quarter as the coronavirus jolted businesses more than initially thought, data showed on Tuesday, underscoring the daunting task policymakers face in averting a steeper recession.

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Sequoia Capital China raising $2.2 billion in new yuan fund, say sources By Reuters




By Kane Wu and Julie Zhu

HONG KONG (Reuters) – Investor Sequoia Capital China is raising at least 15 billion yuan ($2.2 billion) in a new yuan-denominated fund, people with knowledge of the matter said, building a war chest as the world’s second-largest economy recovers from a virus-induced slump.

The fund, Sequoia China’s sixth, is likely to be the largest of its kind for the company and is expected to focus on sectors ranging from industrial technology, healthcare and consumer to media, said one of the people.

The early investor in top Chinese technology firms such as Alibaba Group Holding (N:) reached the first close of the fundraising late last year, according to another person.

The Chinese investment arm of Silicon Valley venture capital firm Sequoia Capital looks to fully close the fundraising in the coming weeks and the final fund size would be about 18 billion yuan, said a third person.

The people declined to be named as the details of the fundraising plans are not public yet.

Sequoia China declined to comment.

The firm’s yuan-denominated fundraising comes amid ongoing U.S.-China tensions over technology that have put global funds and companies in the cross-fire, and triggered concerns about the Chinese firms’ ability to access private capital overseas.

One of Sequoia China’s most prominent portfolios – Chinese tech major Bytedance – is in the final negotiations with the U.S. government over the fate of its global short-video streaming application TikTok.

The fundraising also comes as Shanghai’s Nasdaq-style STAR Market has become increasingly attractive to China’s tech founders as they prepare to leverage higher valuations and take their companies public, offering domestic investors an attractive exit option.

Sequoia China was founded in 2005 by former investment banker and entrepreneur Neil Shen, now one of China’s best-known venture capitalists.

It has invested in over 500 firms in China, including e-tailer major JD (NASDAQ:).com (HK:), food delivery giant Meituan Dianping (HK:) and ride-hailing company Didi Chuxing, according to the firm.

China-focused investment managers raised only $12 billion in July-August this year in funds denominated in U.S. dollars and yuan, compared with $68 billion and $59 billion over the same period in 2019 and 2018, according to data provider Preqin.

Venture capital and private equity fundraising are, however, picking up as a number of big names, with track records of landing big-ticket merger-and-acquisition deals and steady returns, come to the market.

Private equity firm Hillhouse Capital Group is raising a fund targeting over 20 billion yuan ($3 billion), its largest-yuan fund, Reuters reported last week.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



UK manufacturers see little sign of ‘V’-shaped recovery By Reuters



© Reuters. FILE PHOTO: Bentley cars go through final quality control as they come off the production line at their factory in Crewe

LONDON (Reuters) – British manufacturers see no evidence of a ‘V’-shaped recovery from the coronavirus pandemic underway and many are planning to slash investment, a business survey showed on Monday.

The Make UK industry association and accountants BDO said output and orders had improved from historic lows struck last quarter during the depths of the pandemic.

But the survey’s quarterly gauge of investment intentions fell to -32% from -26%, almost touching depths last seen in the financial crisis.

“Manufacturing has begun to climb away from the abyss that it stared into earlier in the year,” said Stephen Phipson, chief executive at Make UK.

“But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a ‘V’-shaped recovery nothing more than fanciful.”

The possibility that Britain and the European Union fail to agree a trade deal before the end of the Brexit transition period would be a “final nail in the coffin” for many manufacturers, Phipson added.

Output in Britain’s manufacturing sector was still 8.7% below its pre-pandemic level in July, according to official data published earlier this month.

Like other indicators of the labour market, manufacturers’ employment expectations deteriorated in the latest Make UK/BDO survey, although its gauge of future output improved somewhat.

The survey of 364 companies was conducted between Aug. 5 and Aug. 26.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.