Europe shrinks, US slows

There wasn't much to cheer about in yesterday's economic data. From Reuters:

Major economies on both sides of the Atlantic are increasingly vulnerable to each other's weakness, as the euro zone teeters on the brink of recession while the United States is barely muddling through, data showed on Wednesday.

Yesterday, we got some details on eurozone second quarter economic performance.

Europe showed just how exposed its economy is to a broader downturn in the industrialized world with news that weak investment, household spending and exports all hurt in the second quarter, when the economy shrank.

EU statistics office Eurostat's first breakdown of the reasons for a drop in gross domestic product in the second quarter showed the chief culprits were a more than 1 percent slide in investment as well as a fall in household spending.

Declines in growth of 0.2 and 0.1 percent quarter-on-quarter in the euro zone and the wider 27-country European Union respectively have fueled fears the bloc will slide into full-blown recession.

The third quarter may not be much better.

The Markit Eurozone Services Purchasing Managers Index (PMI) rose marginally in the euro zone from July's five-year low, to 48.5 from 48.3, but remained below the 50.0 mark that divides growth from contraction for a third straight month.

There were some positive data from the US.

In the United States, factory orders rose slightly more than expected in July...

Factory orders rose 1.3 percent in the month after an upwardly revised 2.1 percent gain in June, the Commerce Department said...

Planned layoffs at U.S. companies were running 12 percent higher in August than a year ago, according to a report from employment consulting firm Challenger, Gray & Christmas Inc.

Optimists will take heart from the fact that job cuts at U.S. companies last month were 14 percent lower than a month earlier. However, with U.S. companies' planned layoffs up 29 percent in January to August from the same period a year ago, economic damage has already been done.

There is little doubt though that the US economy has hit a weak patch. From Bloomberg:

Business across most of the U.S. was "slow" last month, while almost all Federal Reserve districts reported pressure to raise prices because of higher commodity costs, the central bank said in its regional economic survey.

Consumer spending was "slow" in most of the 12 Fed districts as housing "weakened or remained soft," the Fed said in its Beige Book report, published two weeks before officials meet to set interest rates. A "general pullback in hiring" helped keep wage increases "moderate," the Fed said today.