China’s Woes Echo in U.S. Earnings

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from The Wall Street Journal,

In quarterly conference calls, U.S. executives recited a litany of pain resulting from a slowdown in China’s economy.

With the U.S. recession behind them and the European fiscal crisis fading, American companies are grappling with a new threat: China’s economic blues.

In quarterly conference calls, U.S. executives recited a litany of pain, from mild to severe, resulting from a slowdown in China’s economy, the world’s second-largest.

Engine-maker Cummins Inc., for example, said demand for excavators in China fell 34% in the second quarter from a year ago with no signs of improvement. For such companies as Weyerhaeuser Co. , less construction in China means logs and lumber pile up in the U.S., pushing down prices.

“China was weak in the quarter, and we expect it to be weak as we move forward,” Robyn Denholm, chief financial officer of Juniper Networks Inc., told investors. China pulled down the networking-gear maker’s Asia-Pacific revenues by 3% from the prior quarter; without China, they would have risen 11%.

China’s policy makers are stimulating the economy to counter slackening consumer demand and falling factory output. Authorities have intervened in financial markets by devaluing the currency, a move that would help Chinese exporters while pinching some U.S. companies by making their products more expensive for Chinese buyers. Chinese officials are trying to keep the economy growing at 7% in 2015, the country’s slowest pace in more than two decades.

It comes at a tough time for U.S. businesses. Overall, companies in the S&P 500 index are on track to eke out a 1.2% increase in second-quarter earnings, according to data from Thomson Reuters. That is the slowest growth since fall 2012.

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