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Macroeconomic indicators - US economy struggling but no sign recession

Dow Jones reported that the US economy continues to struggle, but data suggest it's not slipped or about to slip into recession.

The manufacturing sector appears to have grown at a worryingly slow rate in August but at least it's not contracting as some feared. Meanwhile, the number of people filing new claims for unemployment benefits last week dropped, though their continued high level indicates that hiring remains slow. And the housing sector is, as expected, still in the dumps.

The biggest surprise in indicator releases came from a survey of manufacturers, which showed the sector managed to skirt contraction in August. The ISM's manufacturing purchasing managers index fell only to 50.6 from 50.9 in July. A reading above 50 indicates expanding activity. Economists were fearing a drop to 48.8.

Mr Ian Shepherdson chief economist at High Frequency Economics said that "To call this a relief is something of an understatement. It could have been horrendous."

Since the end of July 2011, when a government snapshot of the economy showed it barely grew in the first half, fears have been mounting that a new recession could hit the US only two years after the deep downturn of 2008 and 2009. A plunge in a survey of manufacturers by the Philadelphia Fed August 18th 2011 exacerbated those fears.

The expansionary reading for the US manufacturing sector out Thursday contrasted with factory contractions reported around the globe. Manufacturing activity shrunk in the euro zone, the UK, Australia and South Korea, while there were mixed signals from China.

Even with the better than expected PMI in the US, the details of the report were generally weak. The ISM's new orders index remained in contraction territory at 49.6, raising the risk that employment may have fallen in September following what's expected to be a weak jobs reading last month.

Meanwhile, the Labor Department said that initial jobless claims fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27th 2011.