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Economy Briefs: Manufacturing shrinks for first time in 3 years
Question of the Day
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 such as 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.
Microsoft to take $6.2B charge for online ad biz
REDMOND — Microsoft is absorbing a $6.2 billion charge to reflect its inability to produce more revenue from an online ad service that it bought nearly five years ago.
The noncash charge announced Monday could saddle Microsoft Corp. with a loss for its fiscal fourth quarter ending in June. Analysts polled by FactSet had predicted Microsoft would earn about $5.3 billion for the period. Microsoft is scheduled to release its latest quarterly results July 19.
The software-maker, which is based in Redmond, Wash., blamed the setback primarily on the disappointing performance of aQuantive, an online advertising service Microsoft bought in 2007 for $6.3 billion. It was the most expensive acquisition in the company’s 37-year history at the time, surpassed only by the $8.5 billion purchase of Skype last year.
The charge represents Microsoft’s sobering acknowledgment that aQuantive didn’t increase the company’s online advertising revenue as much as management had anticipated.
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