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US Retail Sector Continues to Decline

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Mixed U.S. economic data sent stock markets lower in Europe and the United States Wednesday.

Continued improvement in American manufacturing was offset by further signs of weakness in the service sector.

On the positive side, the Commerce Department reports U.S. factory orders rose 0.4 percent in June, beating analysts' expectations. It was the fourth boost in orders in five months.

But a private group says America's service sector continues to languish. The Institute for Supply Management's service index registered 46.4 percent in July, down from 47 percent in June. Any reading below 50 signals contraction of the service sector, and July's reading was the tenth consecutive month of decline. The U.S. service sector is closely-watched, as it accounts for roughly 80 percent of U.S. economic output.

Coming after a week of almost-universally upbeat economic data that buoyed U.S. markets, Wednesday's more-somber news is a reality-check, according to Alan Brown of Schroders, an asset management company.

"The U.S. data should remind us that this recovery is not likely to be V-shaped [recovery will be slow and uneven]. It seems to me that we are going to see rising unemployment for a long time yet," said Brown. "And although we have green shoots [hopeful signs] and for the moment the news is good, I think we could have challenges as we get to the end of the year. We are definitely coming out of recession. But we believe the recovery will be pretty muted."

On Friday, the U.S. government will provide the latest unemployment data. Joblessness stands at 9.5 percent, and many economists expect it to top 10 percent in coming months. Wednesday provided a private sector hint of what the government report might contain. A survey of American employers showed the private sector shed 371,000 jobs in July.

"The job market is still very difficult. We are seeing layoffs continue, not at the heavy pace we saw at the beginning of the year, but they certainly have not abated," said Chicago-based labor expert John Challenger.

After rising steadily since last week, oil prices dipped for a second consecutive day amid reports of growing U.S. crude inventories.
 

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