Doubts growing over US economy

The US manufacturing outlook darkened and job-cutting announcements shot up in August, data showed Tuesday, stoking fears for the economy and sending shares into a dive.

Analysts' for a recovery in US industry were dashed by a survey showing manufacturing activity crawled ahead in August but that new orders declined.

The Institute for Supply Management (ISM) purchasing managers' index -- based on a survey of supply executives -- was at 50.5 points in August, unchanged from July. Any figure above 50 points indicates growth.

"Manufacturing activity improved slightly during August," said the survey committee chairman, Norbert Ore.

"Putting the year in perspective, we now have seven consecutive months of modest growth," Ore said.

But a breakdown of the figures also showed the ISM's new orders index declined from 50.4 points in July to 49.7 points in August.

"New orders softened and are a cause for concern as we look at the balance of the year," Ore said.

"At the current level of growth in the overall economy, many manufacturers find themselves anxious about second-half sales."

The labor market also was fragile. Job cut announcements surged to 118,067 in August from 80,966 in July, said a survey by Challenger, Gray and Christmas, an international outplacement firm. It was the third highest figure this year.

"Some economists believe the economy is fundamentally strong and on a recovery track but the August job-cut surge suggests that employers do not necessarily agree with such an outlook," said the firm's chief executive, John Challenger.

The manufacturing figures dashed hopes for a recovery from the July slump, said Naroff Economic Advisors president and chief economist Joel Naroff.

"While the economy is still growing, there is no question about it, the growth pace is nothing sterling," Naroff said.

The drop in new orders was a concern, he said.

"While production is still strong, orders are not," Naroff added. "It tells me that the strong production levels we're seeing are at risk. That is clearly a worry."

Wall Street took the news badly. The Dow Jones Industrial Average of 30 top stocks tumbled 355.45 points, or 4.10 percent, to 8,308.05 -- the lowest close since July 26, when Wall Street was still crawling its way out of the July rout.