U.S. consumers and businesses are not so worried that the economy is about to tumble into a recession after all.
Manufacturing grew a little more slowly in August than in July, but it didn't contract as some had feared. Shoppers spent more at retailers during the crucial back-to-school sales season. And fewer people applied for unemployment benefits last week, a sign that companies aren't cutting workers.
Thursday's reports hardly suggest the economy is strong. They mostly point to weak growth.
But data were better than most economists had expected. And after a month in which stocks had plunged and many feared another downturn was looming, even marginally positive news was a welcome sign.
"There is no recession," said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi, in a note to clients. Despite the sharp drop in financial markets in early August, "nothing has happened to the real economy," he said.
Many investors are waiting to see today's report on job growth and unemployment in August. The government's monthly employment report is the most important indicator of business confidence, particularly during uncertain economic times.
Manufacturing grew last month for the 25th-consecutive month, although at the slowest pace in two years, according to the Institute for Supply Management. The private trade group said its index of manufacturing activity slipped to 50.6 last month, down slightly from a reading of 50.9 in July.
Still, economists were expecting a number below 50, the level that separates growth from contraction.
Orders contracted, though at a slower pace than the previous month. Production shrank for the first time in 26 months.
"To call this a relief is something of an understatement," said Ian Shepherdson, an economist at High Frequency Economics. "It could have been horrendous."
Weekly applications for unemployment benefits fell 12,000 to a seasonally adjusted 409,000 last week, the Labor Department said. Striking Verizon workers drove applications higher in the previous two weeks. The strike ended last week and is no longer inflating application totals.
Applications have come down steadily from an eight-month high of 478,000 in April.
Still, they typically need to drop below 375,000 to signal sustainable job growth. They haven't been at that level since February.
The downward trend suggests employers aren't stepping up layoffs amid renewed concerns about the economy's health.
Consumers kept shopping in August, despite the drop in stock prices. Target, Macy's, teen retailer Wet Seal and warehouse club operator Costco Wholesale posted sales gains that beat Wall Street expectations. Luxury chains such as Nordstrom and Saks also fared well.
The economy expanded at an annual rate of just 0.7 percent in the first half of the year, the weakest six months of growth since the recession officially ended.
That had added to concerns that the anemic economy was vulnerable to shocks and could fall into recession.
