Industrial productions fall in February
WASHINGTON (AP) - March 17, 2008 The Federal Reserve said Monday that output at the nation's
factories, mines and utilities dropped by 0.5 percent in February,
the biggest decline since a 0.6 percent fall last October.
It was a far weaker reading than the slight increase of 0.1
percent that many analysts had been expecting. It served to
underscore the severity of the current economic slowdown.
Daniel Meckstroth, chief economist for the Manufacturers
Alliance/MAPI, said he believed that the manufacturing sector fell
into a recession in October and the overall economy followed in
December.
"The economic shock of a housing collapse, credit crunch,
including financial sector turmoil, and sky-high oil prices have
squeezed consumers' budgets to the point where there is no growth
left," he said.
On /*Wall Street*/, the Dow Jones industrial average rose 21.16
points to close at 11,972.25, after falling nearly 200 points
earlier in the day as investors grappled with the JPMorgan Chase &
Co.'s government-backed buyout of troubled investment bank Bear
Stearns Cos.
The Federal Reserve moved aggressively over the weekend to keep
a crisis in financial markets from spreading and Fed officials are
expected to follow with another sizable cut in interest rates for
consumers at their regular meeting on Tuesday.
However, many economists believe the moves have not come in time
to keep the country out of a recession although analysts said they
should limit the severity of the downturn.
Meanwhile, the deficit in the broadest measure of foreign trade
declined in 2007 after setting records for five straight years. The
9 percent improvement reflected strong growth in U.S. exports which
offset a soaring foreign oil bill.
The Commerce Department reported the current account deficit
fell to $738.6 billion last year, falling from an all-time high of
$811.5 billion in 2006.
The current account is the broadest measure of trade because it
covers not only goods and services but also investment flows
between the United States and other countries. It also represents
the amount of dollars flowing into foreign hands to finance the
country's overall trade deficit.
The deficit for 2007 represented 5.3 percent of the total
economy, down from a record 6.2 percent of the economy in 2007.
Even with the decline to a deficit of $738.6 billion, it still
means the United States is borrowing $2 billion every day to
finance its appetite for foreign-made cars, televisions and crude
oil.
So far, foreigners have been happy to ship their products to the
United States and take dollars in return. However, the ever-rising
supply of dollars in foreign hands leaves the United States
vulnerable if there is a sudden reversal of that trend. Worries
have grown recently given the sharp decline in the value of the
dollar, which has fallen to record lows against the euro and is at
the lowest level against the Japanese yen since 1995.
The current account deficit was also down for the fourth quarter
to $172.9 billion, a 2.5 percent drop from the third quarter
deficit of $177.4 billion. It marked the third quarter quarterly
drop in the deficit and pushed the quarter imbalance to its lowest
level since the summer of 2004.
Economists believe the deficit will keep falling this year,
reflecting in part a severe slowdown, and possibly a recession, in
the United States. The trade balance is also being helped by the
weaker dollar, which makes U.S. goods more competitive on overseas
markets and makes foreign goods more expensive and thus less
attractive to American consumers.
For the year, the deficit for goods dropped to $815.4 billion
while the surplus on services, items such as airline tickets,
increased to $106.9 billion. U.S. investors earned $74.3 billion
more on their overseas investments than foreigners earned on their
U.S. investments, up significantly from 2006.
The deficit on unilateral transers, the category that includes
U.S. foreign aid, rose to $104.4 billion last year.
