Industrial output down, but so is trade deficit

WASHINGTON - Industrial output fell in February by the largest amount in four months, providing yet another gloomy assessment of the economy's health.

The Federal Reserve said Monday that output at factories, mines and utilities dropped by 0.5 percent in February, the biggest decline since a 0.6 percent fall in October.

It was a far weaker reading than the slight increase of 0.1 percent that many analysts had been expecting.

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

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 account deficit fell to $738.6 billion last year, down from an all-time high of $811.5 billion in 2006.

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, TVs and crude oil.

So far, foreigners have been happy to ship 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.