- The Washington Times - Tuesday, March 18, 2008


Industrial output fell in February by the biggest amount in four months, adding yet another gloomy assessment of the economy’s health.

The Federal Reserve said yesterday that output at the nation’s factories, mines and utilities dropped by 0.5 percent last month, 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 expected. It served to underscore the severity of the current economic slowdown.

Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said he thinks that the manufacturing sector fell into a recession in October and that 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.

The Federal Reserve moved aggressively over the weekend to prevent a crisis in financial markets from spreading, and Fed officials were expected to follow with another sizable cut in interest rates for consumers at their regular meeting today.

However, many economists think the moves did not come in time to stave off a recession, although analysts said the moves 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 from a 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 desire for foreign-made cars, televisions and crude oil.

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