Deepening US slump spreads to factories

Washington: A spreading economic malaise seeped into US factories in February and March as waning demand more than offset the export benefits of a cheaper dollar, a series of reports showed on Monday.

A Federal Reserve report on industrial output showed factories ran at their slowest rate in more than two years during February while a key gauge of factory business in the Northeastern US slumped to a record low in March.

Taken together, the reports reinforced concern that the world's largest economy stalled during the first quarter and was in an actual downturn, though Bush administration officials refuse to concede a recession has started.

The New York Fed said its "Empire State" gauge of general business activity plunged in March to a record minus 22.23 from minus 11.72 in February, far worse than analysts had expected, as was the case with the broader industrial production report.

Fall in production

The Fed report showed overall industrial production by the nation's mines, factories and utilities fell an unexpectedly steep 0.5 per cent in February. That followed a slight 0.1 per cent January gain and was the biggest decline in total output since last October.

Market participants, transfixed by developments in the US financial sector after a weekend collapse of one large firm and new Fed action to add liquidity, paid scant attention to the latest economic numbers.

After see-sawing throughout the day, the Dow Jones industrial average ended up 0.18 per cent at 11,972.25. The Nasdaq Composite Index posted a 1.6 per cent loss to close at 2,177.01. Investors scrambled for safety into US Treasury securities, driving prices up for longer maturities and yields.