China's exports grew at a slower pace than forecast in August posting a wider-than-expected trade surplus as imports unexpectedly contracted from the year-ago period, suggesting anemic domestic demand

Exports grew 2.7% year-on-year last month, below the 3% forecast in a Reuters poll, confirming President Hu Jintao's warning of the "grave challenges" posed by the world economy.

Data for imports was even worse, showing a fall of 2.6% on the year in August, compared with expectations for a 3.5% rise. Remember that China's biggest customers are the debt-ridden, recession-bound European Union and the still struggling United States. The import surprise on the downside is very unusual. It is an alarming sign for the government and they probably saw it coming. Although falling imports might suggest weaker domestic demand, we should note falling prices of commodity imports play a key role. China could potentially purchase more commodities and spend more on infrastructure to take advantage of the low prices.

The drop in credit-card borrowing coincides with a slowdown in hiring this year and a rise in consumer pessimism that indicate households are wary of taking on debt. Employers added fewer workers to payrolls than forecast in August, while a gain in average hourly earnings from a year earlier matched the smallest increase since records began in 2007.

A wider trade deficit acts as a drag on growth because the U.S. is typically spending more on imports while taking in less from the sales of American-made goods.

Weaker growth around the globe is hurting U.S. exports. Exports to Europe fell 11.7%. Many European countries are recession, which has cut demand for American-made goods. The region accounts for about one-fifth of U.S. exports.

The deficit with China grew 7.2% in July to $29.4 billion, the largest with any single country. That reflected a 5.6% jump in imports, which vastly outpaced a smaller 0.4% rise in U.S. exports.

Many economists expect higher fuel costs will contribute to a short-term rise in inflation, however, there was little sign of broader inflation pressures in the import data. Non-petroleum imports declined 0.2%, a sign that the cooling global economy is reducing companies' ability to raise prices.

The U.S. Federal Reserve’s policy-setting meeting got underway. Investors took some risk off the table before the announcement on Thursday at the conclusion of the two-day meeting.

Inventories are a key element in the government's measure of changes in gross domestic product. Weaker growth in inventories dragged on GDP during the second quarter, when the economy expanded at a 1.7 % annual rate.

July's gain in inventories was enough for some economists to slightly raise forecasts for third-quarter GDP, although others said the drop in sales negated the boost.

Applications for U.S. jobless benefits jumped by 15,000 to a seasonally adjusted 382,000 in the week ended Sept. 8,, with about half the increase related to tropical storm Isaac,

U.S. wholesale prices jumped a seasonally adjusted 1.7% in August, mainly because of higher fuel prices, the Labor Department said Thursday. Excluding the volatile categories of food and energy, so-called core wholesale prices rose a much smaller 0.2%.�

Cheap mortgages have helped lift the housing market. Sales of new and previously occupied homes are well above last year's levels. Low rates have also allowed people to refinance, which lowers monthly mortgage payments and helps boosts consumer spending.

Home prices are increasing more consistently this year, largely because the supply of homes has shrunk while sales have risen. And the number of Americans who owe more on their mortgages than their homes are worth declined in the second quarter.

Mortgage rates are low because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.

By an 11-to-1 vote, the Federal Reserve's monetary-policy panel has decided to launch a new program of open-ended bond purchases, QE3, saying bank will buy $40 billion in agency mortgage-backed securities each month, starting Friday.

The U.S. federal budget deficit increased by $191 billion in August and has topped $1 trillion for the fourth straight year.

The deficit for the first 11 months of the 2012 budget year totaled $1.16 trillion, the Treasury Department said Thursday. That's 6 percent less than the $1.23 trillion in the same period last year. The fiscal year ends Sept. 30.

One reason for the improvement: Income tax receipts are up as the economy improves slowly.

Romney has promised to cut spending to narrow the budget gap. He would cap spending at 20 percent of gross domestic product, a measure of the nation's overall economic output. Spending currently equals about 24 percent of GDP.

Note that 80% of the increase in the consumer price index was due to a jump in gasoline costs.

Consumer prices increased 1.7% in the 12 months ended in August, the report showed. The core CPI climbed 1.9 percent over the past 12 months.

US Industrial Production Falls Most in Three Years. Industrial production encompasses output from factories, utilities, and mining operations, including oil and natural gas production. Utilities output declined 3.6 percent in August. Capacity utilization, a measure of how fully firms are using their resources, was at 78.2 percent in August, below forecasts and declining from 79.2 percent in July.

The Federal Reserve�s declaration of a new bond-buying program will begin bulking back of a balance sheet that has been basically flat for more than a year.

Click for full-size interactive graphic.
Assets on the Fed�s balance sheet sit at around $2.8 trillion as of Wednesday. The level has held pretty stable since June 2011, when the central bank ended its previous bond-buying program, commonly known as QE2.

U.S. consumers paid sharply higher prices for gasoline in August as an extended bout of low inflation was broken, at least temporarily.

The consumer price index jumped 0.6% last month to mark the biggest advance since June 2009, the Labor Department reported.