US factory output rises just 0.1 pct. in September

WASHINGTON — U.S. factories barely boosted their output in September, adding to other signs that the economy was slowing even before the government shutdown began on Oct. 1.

Manufacturing production rose only 0.1 percent, the Federal Reserve said Monday. That's down from a 0.5 percent gain in August, which was slightly lower than previously reported.

Automakers boosted their output in September, but the gain was offset by declines at makers of computers, furniture and appliances.

Overall industrial production increased 0.6 percent in September, mostly because of a 4.4 percent jump in utility output. Utilities had fallen for five months. But September was unseasonably warm, likely increasing air conditioning use.

Mining output, which includes oil production, rose 0.2 percent, its sixth straight increase.

Factory output is the largest component of industrial production. It had shown signs of rebounding over the summer, raising hopes that factories would help drive economic growth in the second half of the year.

But several reports suggest businesses and consumers had both grown more cautious right before the 16-day partial government shutdown. And overall hiring has slowed. Those factors could keep the economy weak until next year.

Orders for industrial machinery and other core capital goods, which signal business confidence in the economy, fell sharply in September, the government said last week. Economists pay close attention to those orders because they typically signal expansion.

Still, one measure of manufacturing said overall factory activity expanded in September at the fastest pace in 2 ½ years. The closely watched Institute for Supply Management manufacturing survey noted that production rose and manufacturers stepped up hiring, while new orders jumped, though not as quickly as the previous month.

Some economists see that as a sign manufacturing may yet pick up later this year or in early 2014.

"With a modest global recovery underway and the dollar now falling, we would expect industry to perform a bit better," said Paul Ashworth, an economist at Capital Economics.

A measure of the total existing capacity used by factories, mines and utilities rose to the highest level since July 2008. That suggests that if demand rises much more, companies will have to invest in more factories and other production facilities to increase output.

The Fed's gauge of capacity utilization is still about 2 percentage points below its 40-year average of just over 80 percent.

The Fed's report on industrial production was delayed by the 16-day shutdown. It was originally scheduled to be released Oct. 17.

Most economists predict growth slowed in the July-September quarter to an annual rate of about 1.5 percent to 2 percent, down from a 2.5 percent rate in the April-June quarter. And the shutdown is likely to keep growth at that sluggish pace for the final three months of the year.

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Gas prices fall 4 cents in Mass.

BOSTON — Gasoline prices in Massachusetts are continuing on a downward path.

AAA Southern New England reported on Monday that its latest survey found an average price of $3.34 per gallon for self-serve regular in the Bay State. That's down four cents from last week's survey and the average has dropped 13 cents in the past month.

AAA said current prices ranged from as low as $3.19 to as high as $3.53.

The national average for self-serve regular is $3.39 per gallon, five cents higher than Massachusetts.

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Merck 3Q net income falls on charges, lower sales

Merck & Co.'s third-quarter profit plunged 35 percent because of competition from generic drugs, lower sales of its top-selling medicine, and restructuring and acquisition charges.

It still beat Wall Street's profit expectations, but sharply lowered its own forecast for the full year, sending shares down.

Generic competition continues to hammer asthma and allergy pill Singulair, cutting sales 53 percent to $280 million. The drug brought in $5.5 billion a year until its patent expired in August 2012 and cheap copycat versions flooded the market.

The world's third-biggest drugmaker by revenue previously has weathered generic competition to its blockbusters well, usually managing to keep total sales about the same level as before big patent expirations.

"This year, we were not able to do that," CEO Kenneth Frazier said Monday in an interview with The Associated Press.

Revenue in the quarter totaled $11.03 billion, down 4 percent and below analysts' expectations for $11.13 billion.

Besides Singulair, Merck is being hurt by generic versions of a half-dozen other drugs, plus unfavorable currency exchange rates, and its newer medicines aren't picking up all the slack. Merck said it now expects total 2013 sales to be down 5 percent to 6 percent from last year.

Its top seller, Type 2 diabetes pill Januvia, had been climbing steadily toward the $4 billion-a-year mark, but sales slipped 5 percent in the quarter. Merck blamed exchange rates and U.S. wholesalers reducing inventory. It said it will devote more resources to marketing Januvia and Janumet, a combination pill that includes the generic diabetes drug metformin.

"Big, ugly surprise in revenues," concluded Erik Gordon, an analyst and professor at University of Michigan's Ross School of Business. "It's a contrast to their sisters in Big Pharma who have been coming close to hitting their projections."

Net income was $1.12 billion, or 38 cents per share, down from $1.73 billion, or 56 cents per share, a year earlier.

The company, based in Whitehouse Station. N.J., said earnings would have been $2.73 billion, or 92 cents per share, excluding charges of $1.2 billion for merger and integration costs and $967 million for restructuring costs. Analysts surveyed by FactSet were expecting 88 cents per share.

Four weeks ago, the company announced another big restructuring program to reduce costs, including eliminating 8,500 jobs, plus 7,500 not yet cut under its 2011 restructuring, together 20 percent of Merck's workforce.

Frazier stressed the drugmaker will continue to invest in research where it has strong prospects, particularly cancer, hepatitis C, immunology and vaccines. It's in early-phase human testing of a compound called MK-3475, that uses a relatively new strategy of harnessing the immune system to fight tumors, against six cancer types.

"This is one of the most exciting things that has happened in my 22 years" at Merck, Frazier said.

The Food and Drug Administration recently gave that drug and Merck's combination hepatitis C drug, MK-5182/MK-8742, "breakthrough therapy" designations, indicating they'll get accelerated reviews because they're seen as potential big advances.

Sales fell 6 percent to $396 million for Merck's combination cholesterol pill, Vytori . But sales of Gardasil, a vaccine against cancer-causing human papilloma virus, jumped 15 percent to $665 million, and sales of Remicade, a drug for immune disorders such as arthritis, climbed 17 percent to $574 million.

Sales of veterinary medicines and consumer health products such as Claritin allergy pills both declined 2 percent, to $800 million and $443 million, respectively.

"Overall, a weak quarter across many divisions," BernsteinResearch analyst Dr. Timothy Anderson wrote to investors.

The company lowered its 2013 profit forecast to $1.61 to $1.79 per share, from its July forecast of $1.84 to $2.05, partly because of unfavorable exchange rates.

In early trading, Merck shares dropped $1.10, or 2.5 percent, to $45.44.

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Follow Linda A. Johnson at http://twitter.com/LindaJ_onPharma

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Stocks steady as investors await Fed meeting

LONDON — Global stock markets turned cautious Monday as investors waited for the U.S. Federal Reserve's monthly meeting for clues on when the central bank will start reducing its monetary stimulus.

With uncertainty over the raising of the U.S. borrowing limit temporarily resolved, investors have focused on other matters, notably when the Fed will reduce its mammoth monetary stimulus that has been a boon for stock markets.

U.S. hiring and durable goods orders for September were weaker than expected, signaling that growth momentum may be slowing and reinforcing expectations that a scaling back of stimulus known as "tapering" won't begin until next year, Mitul Kotecha of Credit Agricole CIB in Hong Kong said in a market commentary.

Further U.S. data releases this week including September industrial production, retail sales, inflation and consumer confidence as well as a Fed policy meeting could reaffirm that expectation, he said. The Fed is buying $85 billion of U.S. government bonds and other securities with the aim of keeping interest rates low to support economic recovery.

"The bad news is good philosophy of markets means that data is helping to aid expectations that Fed tapering may be delayed," he said. "We continue to anticipate tapering to begin in January although admittedly the market is shifting expectations to even later."

Although Asian indexes closed higher, trading became more cautious in Europe and the U.S.

Germany's DAX was down 0.2 percent at 8,969.22, while Britain's FTSE 100 shed 0.1 percent to 6,716.85. The CAC-40 in France was off 0.7 percent at 4,242.34.

Wall Street was steady on the open, with the Dow down 0.1 percent at 15,561.55, though the S&P 500 rose 0.1 percent to 1,760.83, a record high. The index had been buoyed last week by technology stocks such as Microsoft and Amazon.

Earlier, Japan's Nikkei 225 rose 2.2 percent to close at 14,396.04, recovering from a big drop last week. Hong Kong's Hang Seng added 0.5 percent to 22,806.58.

China's Shanghai Composite Index rebounded from earlier losses to rise fractionally to 2,133.87, putting aside worries over a possible credit crunch following the Chinese central bank's refusal last week to inject funds into money markets to curb frothy credit growth.

Benchmarks in Taiwan, Seoul, Malaysia and Singapore were also higher.

In energy trading, benchmark U.S. crude for December delivery was up 23 cents at $98.10 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 74 cents on Friday.

The euro was down 0.2 percent at $1.3784, while the dollar shed 0.1 percent against the Japanese yen, to 97.65 yen.

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Italian vintners look abroad as home sales slump

TORANO NUOVO, Italy — It's harvest season at the family-run vintner Emidio Pepe in central Italy and workers are wading into the vineyards, hand-picking grapes and pressing them under their boots in giant wooden vats.

The seasonal ritual has brought together generations of rural communities. But the final product, the highly-rated Pecorino white, is now more likely to be enjoyed in New York or Beijing than in the local village of Torano Nuovo, in the Abruzzo region. That's because wine-drinking in Italy, one of the world's biggest producers, is hitting record lows, forcing many vintners to seek buyers abroad.

Consumption is at its weakest since Italy was unified as a country in 1861, according to Coldiretti, the main farmers' association. The most immediate cause has been the economic downturn, which has pinched incomes. But that has just accelerated what has been a decades-long slide in consumption.

Italians are expected to drink 40 liters (10.6 gallons) a head this year, down from 45 liters (11.9 gallons) before the financial crisis began in 2007 and just about a third of the 110 liters (29 gallons) seen in the 1970s, according to Assoenologi, the main enologists' association.

In the past 25 years, wine "has become a hedonistic product, which is not part of Italians' basic diet anymore," said Michele Fino, law professor and wine expert from the University of Gastronomic Studies in Pollenzo.

That leaves it more exposed to short-term fluctuations in economic conditions. The two-year recession was like "the flu that arrives when one's defenses are already low," Fino said.

Italians' change of attitude is going hand in hand with the increasing popularity of other, more casual alcoholic drinks — above all, beer, particularly among the young. While the average Italian's consumption of wine is only a third of what it was in the 1970s, beer drinking has doubled.

"We like beer because it's more refreshing, lively, soft and lighter," said Francesco Rizzo, a 30-year-old hanging out with friends one night in Rome's Campo de' Fiori, one of Rome's nightlife hotspots where beer is a top choice.

With interest ebbing at home, more than 50 percent of Italian wine is currently exported, up from 28 percent in 2000. The biggest buyers are the United States and Germany. But sales are rising quickly in many new markets. In China, for example, they grew by almost a fifth from 2011 to 2012.

But it's mainly top-end wines that find a way on foreign markets, whereas many Italian producers of low- and mid-range wines are still suffering, despite the growing interest abroad.

"Paradoxically, the wines that do best during an economic crisis are the most expensive ones because those who buy top-end wines are those with economic means, and therefore those who suffer the crisis the least," said food and wine expert Daniele Cernilli.

Emidio Pepe is one such example.

Sofia Pepe, who is in charge of production and sales, said the company had been able to weather the recession by securing a loyal customer base abroad that is willing to pay its high prices. Its bottles go from 15 euros for a 2011 Trebbiano to 300 euros for the 1964 Montepulciano.

Sofia says Emidio Pepe relies on its reputation for producing organic wines made with traditional methods. No weed killers, filters or purifiers are used in the production process. Demand has held up, with some 45 percent of production exported, up from 20-25 percent in the 1970s.

"We're lucky because recently people have been rediscovering unadulterated wines, genuine wines, so we've not really been affected by the crisis," Pepe said.

Incarnating that foreign interest was Chris Leo, a 39-year-old American who participated in the vintner's harvest this year. Leo, who decided to fly over from Los Angeles after tasting an Emidio Pepe wine back home and loving it, argued that interest in wine would endure the slump in Italy.

"In good times you can drink wine in an expensive restaurant, in bad times you can have an incredible dinner in your house with a bottle of a wine on the table," he said. "I think there is always a need for wine."

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UK man accused of hacking US government computers

NEWARK, N.J. — A British man has been arrested and charged with hacking into computer systems of the U.S. Army, NASA, the Environmental Protection Agency and other agencies at a cost of millions of dollars to the federal government.

Lauri Love, 28, of Stradishall, England, and his partners stole information about government employees, including military service members, since at least October 2012 by hacking into government networks and leaving behind "back doors" through which they could return to get data, a grand jury in Newark said in an indictment.

British authorities said Monday that Love was also charged under a U.K. law that allows people to be arrested for starting attacks from the U.K. on computers anywhere in the world. He has been released on bail until February.

The U.S. government said the purpose of the attacks was "to disrupt the operations and infrastructure" of the federal government. The New Jersey indictment does not accuse Love of selling information or doing anything else with it for financial gain.

Love was arrested Friday at his home about 70 miles north of London.

He's accused of working with two co-conspirators in Australia and one in Sweden, none of whom have been charged. Their names were not disclosed in the court filing that was made public Monday.

The indictment includes pieces of instant message conversations that Love allegedly had with his partners.

In one, he seems to brag about infiltrating NASA networks: "ahaha, we owning lots of nasa sites," he said, according to the government. In another exchange, he marvels at the information the group has accessed, writing "this ... stuff is really sensitive," according to prosecutors.

Love was charged in New Jersey because he allegedly used a server in Parsippany. He also faces federal charges in Virginia for other alleged intrusions.

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Wal-Mart checking complaints about greeter firing

DURANGO, Colo. — Wal-Mart officials are checking out complaints that a man who suffered a brain injury in 2005 and has been working as a Wal-Mart greeter in Colorado was fired for clocking in late after lunches without proper representation.

Supporters say Matt Wood deserves a second chance at the Durango store because of his disabilities. They say his wife should've been notified because she is his representative and is best-suited to help him address any problems.

Store spokeswoman Kayla Whaling tells the Durango Herald (http://tinyurl.com/nxbetda ) the corporation takes these cases very seriously and it is looking into the situation.

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Information from: Durango Herald, http://www.durangoherald.com

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Burger King sees early promise in Satisfries

NEW YORK — Burger King says it's attracting more customers with its new lower-calorie fries but is being careful not to call them a home run yet.

The Miami-based company said Monday that it saw sales trends in North America turn positive after last month's launch of "Satisfries," which have 20 percent fewer calories than its regular fries because of a batter that absorbs less oil.

"It brought in incremental consumers who would otherwise not have come into Burger King," said Alex Macedo, the chain's president of North American operations. He noted that other promotions also played a role in improving sales and stressed that the economic climate nevertheless remained challenging.

The move into positive sales territory in October comes after Burger King said that sales slipped 0.3 percent at North America restaurants open at least a year during its third quarter. Satisfries, which cost around 30 cents more than regular fries, weren't introduced until the last week of the quarter, which ended Sept. 30.

The company blamed the quarterly sales dip on intensifying competition and a soft economy. Its net income rose sharply, however, as a result of reduced restaurant expenses and growth overseas.

Executives at McDonald's have also been blaming weak sales on the double whammy of heightened competition and a choppy economy. But other chains such as Chipotle and Starbucks have reported healthy sales, suggesting people are willing to spend on certain types of food and drinks.

As they fight to keep drawing in customers, McDonald's, Burger King and Wendy's have pushed deals more aggressively. Macedo noted that Burger King's deals are designed to maintain profit margins. A deal that offers two sandwiches for $5, for example, on average gets people to spend about $9 when including sides and drinks, he said.

As for Satisfries, the initial increase in customer visits Burger King saw may be tied to the fanfare and promotions around the launch. McCain Foods, which supplies the fries, has said it plans to work with other restaurant operators to sell the reduced-calorie fries.

"They've only been out there for four weeks, so it's premature to say whether it's a home run or not," Macedo said. Either way, he noted that they weren't going to "turn around the business."

The fries are just the latest gambit by Burger King Worldwide Inc. to boost its image. The company has been revamping its business since it was purchased in 2010 by 3G Capital, an investment firm run by Brazilian billionaires. It has been selling more restaurants to franchisees to reduce overhead costs.

For the quarter, Burger King earned $68.2 million, or 19 cents per share. A year earlier it earned $6.6 million, or 2 cents per share.

Excluding certain items, earnings were 23 cents per share, above the 21 cents per share analysts expected.

Revenue declined 40 percent to $275.1 million, mostly because sold more restaurants to franchisees, so books less revenue from those locations. Wall Street expected $264.5 million. Stripping out the impact of the refranchising and foreign currency fluctuations, revenue rose 8.1 percent.

Global sales at restaurants open at least a year rose 0.9 percent. This figure is a key indicator because it strips out the effects of newly opened or closed locations. The strongest performance was in the Asia-Pacific region, which posted a 3.7 percent rise. Latin America and the Caribbean and Europe, the Middle East and Africa also reported improved results.

Burger King boosted its quarterly dividend by a penny to 7 cents per share. Its stock rose 5 percent to $20.73 in morning trading. So far this year, its shares have risen about 16 percent.

The company has more than 13,000 restaurants around the world.

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Luxury goods sales slow as China demand ebbs

MILAN — Chinese shoppers are cutting back on designer duds, leather handbags and pricey watches, putting a drag on global sales of luxury goods, which a study forecasts to expand just 2 percent this year.

The analysis released Monday by Bain & Company estimated 2013 luxury sales at euros 217 billion ($300 billion), up from 212 billion euros in 2012. The increase is a fraction of the double-digit growth enjoyed the previous three years.

Sales of luxury goods in China are expected to grow by just 2.5 percent, to 15.3 billion euros, as a result of an anti-corruption crackdown that has slowed gift-giving and a tendency by Chinese tourists to shop abroad, Bain said.

The United States remains by far the largest luxury market, with sales of 62.5 billion euros, followed by Japan and Italy, both in contraction with 17.2 billion euros and 16.1 billion in sales this year. China is expected to surpass France for the fourth place.

Luxury brands' earnings also were penalized by exchange rate fluctuations, namely a devalued yen and the relative weakness of the euro compared with other currencies, said Claudia D'Arpizio, the Bain partner who led the study.

For the Fondazione Altagamma, an association of Italian producers of upscale fashion, design, food and beverages that commissions the annual study, the analysis contains a few lessons: Internet sales are growing at double-digit rates and consumers are turning away from brands' second lines in favor of new names that are better attuned to local tastes.

"I think it is very clear that this market is becoming more complex and more competitive," D'Arpizio told The Associated Press. "For many it will be a fight for market share going forward. The ones who can understand how the consumer is behaving and accommodate the consumers will be the winners."

Online sales are forecast to grow by 28 percent to 9.8 billion euros in 2013, still representing just 4.5 percent of all luxury purchases. D'Arpizio said that the potential for future growth is enormous, noting that 40 percent of brands have no on-line presence at all.

Online consumers range from off-price bargain hunters to brand-loyal customers. Accessories represent 40 percent of sales followed by apparel with 30 percent.

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CONSOL to sell 5 mines for at least $850M in cash

MORGANTOWN, W.Va. — CONSOL Energy Inc. said Monday it is selling all five of its longwall coal mines in West Virginia to a subsidiary of Ohio-based Murray Energy for a deal that includes $850 million in cash.

Chairman and Chief Executive Officer J. Brett Harvey said the sale of the Consolidation Coal Co. subsidiary was a difficult decision but is good for the company's long-term growth and allows CONSOL to focus more on natural gas exploration and development.

CONSOL is selling the McElroy, Shoemaker, Robinson Run, Loveridge and Blacksville No. 2 mines, which produced a combined 28.5 million tons of thermal coal last year. The transaction also includes river and dock operations with a fleet of 600 barges and 21 towboats.

The deal also gives Murray Energy about 1.1 billion tons of coal reserves.

Murray Energy is taking some $2.4 billion in liabilities off CONSOL's balance sheets, Harvey said, including $2.1 billion in post-retirement benefit plans, $105 million in workers' compensation payments, $61 million in contributions to the Coal Workers' Pneumoconiosis or black lung fund, and $13 million in long-term disability costs.

Murray Energy is also absorbing $149 million in environmental costs and is taking on CONSOL's pension obligations with the United Mine Workers of America. Harvey said that agreement requires contributions of about $33 million per year.

UMWA President Cecil Roberts said the sale "changes nothing" for some 2,800 active hourly workers at the five mines.

"Our collective bargaining agreement does not go away with this transaction," he said, "and our members remain covered by its provisions. There will be no changes in pay, benefits, insurance, schedules, working conditions, safety provisions, grievance procedures or any other language in the contract."

Some 23,000 retirees, dependents and surviving spouses are also affected by the sale, which Roberts said is just one of many in the nation's coalfields.

"It's not the first time coal mines have been sold to new owners, and it won't be the last," he said.

Harvey called the West Virginia employees "among the safest and most productive miners anywhere in the world."

"In the end," he said, "we concluded that the time had come to sell these mature assets to ownership whose strategic direction is more aligned with those mines."

Robert Murray, chairman of Murray Energy, said no company has developed a better relationship with its employees, customers and regulators than CONSOL.

"Murray Energy intends to preserve this well-earned legacy," he said.

CONSOL said it is keeping its flagship Buchanan Mine in Virginia, the Miller Creek Mining Complex in southern West Virginia and its low-cost Pennsylvania operations, the Bailey, Enlow Fork and soon-to-be-completed BMX mines.

CONSOL said it's also retaining royalties on some coal reserves, as well as water treatment payments and tolling fees at its Baltimore Terminal. The company expects to record a pretax gain of $1.3 billion on its fourth-quarter results, assuming the deal closes by Dec. 31.

In a conference call with reporters, President Nick DeIuliis said CONSOL has invested $1 billion in the West Virginia mines over the past five years, and Murray Energy is inheriting solid operations with a highly trained, safety-conscious work force.

The sale is a strategic decision to focus on two areas of growth — natural gas and the overseas sale of coal — while leaving the traditional steam coal market. Demand for coal in power generation is stable, DeIuliis said, but lacks growth potential.

DeIuliis said the change is good for West Virginia and Pennsylvania, where CONSOL plans to invest $25 billion over the next decade in gas drilling and the remaining coal fleet.

CONSOL said the transaction lets it set production targets beyond 2014, and it's now projecting a 30 percent increase in gas production in 2015 and 2016.

Murray Energy owned the Crandall Canyon mine in Utah when it collapsed in 2007 and killed nine people, including three rescuers. Six miners remain permanently entombed. But Murray said his company "operates safe coal mines, with a particular emphasis on fire protection."

"This will help assure the protection of the health and safety of our new employees," he said.

Murray has deep ties to West Virginia. In 2009, he gave West Virginia University $1 million for research into mining methods and use of fossil fuels. Though he graduated from Ohio State, Murray sent three sons to WVU to earn degrees in mining engineering and geology and is considered a longtime friend and supporter of the school.

Murray Energy said the transaction will nearly double its coal production from 30.1 million tons to 58.6 million tons per year, and nearly triple its coal reserves from 859 million tons to almost 2.4 billion tons. The work force will more than double, from 3,300 to 7,100 employees.

Murray said his company will be able to better serve coal-fired power plants "with reliable and low-cost coal supplies."

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