US manufacturing is struggling as businesses brace for the year-end "fiscal cliff" in an economy that entered the third quarter with less momentum than thought.
New orders for long-lasting manufactured goods plunged 13.2 per cent in August, the Commerce Department said on Thursday, the sharpest drop since January 2009, when the economy was deep in recession.
The decline was led by the volatile transportation equipment sector, hit by Boeing aircraft order cancellations. Excluding transportation, durable goods orders were down 1.6 per cent.
"Durable orders have withered this year due to defence spending cuts, the end of accelerated depreciation, the recession in Europe, the emerging markets slowdown and the fiscal cliff," said Chris Low at FTN Financial.
The data highlighted a lacklustre economy 40 days before President Barack Obama faces off against Republican rival Mitt Romney in a November 6 election dominated by voters' worries about high unemployment and slow growth.
The so-called "fiscal cliff", automatic tax increases and spending cuts at year-end, may throw the world's largest economy back into recession, economists say.
Facing that uncertainty, businesses have been reluctant to hire and invest, hoping that a bitterly divided Congress will avert the fiscal tightening.
Other economic data released Thursday were also downbeat.
The Commerce Department revised second-quarter economic growth to an annual rate of 1.3 per cent from the prior estimate of 1.7 per cent.
Much of the revision was due to the effects of the Midwest drought that reduced farm inventories, a temporary factor, but consumer spending, exports and business investment spending also were lower than previously thought.
It was the slowest growth since the first quarter of 2011, and followed a two per cent pace in the first quarter.
"The slowing came primarily from a decline in durable goods consumption and fixed investment," said Scott Hoyt at Moody's Analytics, calling the GDP growth "disappointing".
Pending home sales fell in August from July, but after reaching a two-year peak and were still more than 10 per cent higher than a year ago, the National Association of Realtors reported.
The depressed housing market has been showing signs of recovery recently, six years after a price bubble collapsed.
On Tuesday, the closely watched S&P/Case-Shiller 20-city home price index jumped 1.6 per cent in July, the third straight month of gains.
Responding to the economy's slowdown, the Federal Reserve announced on September 13 a new $US40 billion ($A38 billion) a month bond-buying program aimed at lowering long-term interest rates to help growth and boost employment.
Moody's Hoyt pointed out that tepid growth means unemployment would remain for some time stuck above eight per cent, where it has been since October last year.
"Businesses are reluctant to hire because of the threats posed by the approaching fiscal cliff in Washington, concerns about a potential breakup of the eurozone, and high energy prices," he said.
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