Reuters reported that the slowdown in the economy persisted early in the third quarter as factory activity in the U.S. Mid-Atlantic region contracted in July for a third straight month and new claims for jobless aid surged last week.

The report quotes Omair Sharif, an economist at RBS in Stamford, Connecticut saying, “"The data confirm that the economy has cooled off pretty considerably late in the second quarter and early in the third quarter from the pace we saw earlier in the year.”

According to the report, the economy has been negatively impacted by fears of deep government spending cuts and higher taxes next year, as well as troubles from the debt crisis in Europe.

Reuters also reported that growth in U.S. factory output slowed to a 1.4 percent annual rate in the second quarter after a strong 9.8 percent pace in the first three months of the year, and the Philadelphia Fed's regional factory indexsuggested a continued loss of momentum.