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Manufacturing activity shrank for the second straight month in July, a private survey said Wednesday. Consumer confidence improved slightly last month but remains weak. Rising pessimism about the future is taking a toll on businesses and consumers, many economists say. Europe's financial crisis has weakened that region's economy, hurting U.S. exports. Worries have also intensified that the U.S. economy will fall off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. A recession could follow, Fed Chairman Ben Bernanke has warned. Americans are responding by spending less and saving more. A big reason growth slowed in the second quarter was that consumer spending, which accounts for roughly 70 percent of economic activity, slowed to an annual growth rate of 1.5 percent. That was down from 2.4 percent in the first quarter. Businesses are also cautious and are ordering fewer computers, machinery and other long-lasting factory goods. A measure of business investment spending fell 1.7 percent in June, the third decline in four months. So far, companies aren't stepping up layoffs. The number of people seeking unemployment benefits has fallen in the past month to a weekly average of 365,500, down from 386,250.
[Associated
Press;
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