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Paul Dales, senior U.S. economist at Capital Economics, said the services gain in August "highlights that some parts of the economy are still performing well." But Dales cautioned that the strength in service companies was offset by weakness in manufacturing. A separate ISM report this week showed that manufacturing shrank for a third straight month in August. Dales predicts the economy is growing at a 2 percent annual in the July-September quarter. That would be only a slight improvement from 1.7 percent growth in the April-June period and not nearly enough to significantly lower the unemployment rate. Economists were encouraged by a modest pickup in consumer spending in July, which drives nearly 70 percent of growth. But they cautioned that activity in future months could be hurt by rising gasoline prices, higher food prices and weak wage growth. Manufacturing has slumped as American businesses have scaled back demand for machinery, equipment and other investments. It's also contracting in just about every major economy overseas, including the 17 countries that use the euro, plus Britain, China, Japan and Brazil. The manufacturing weakness in the United States and around the world was expected to keep overall growth and hiring tepid through the November elections. That weakness may help persuade the Federal Reserve to announce new efforts to support the economy when Fed officials next meet on Sept. 12-13.
[Associated
Press;
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