Sharp fall in US factory output

Output from US factories and mines fell in February by the biggest amount in four months, giving fresh evidence that the US heading into a recession.

Industrial output fell 0.5% last month, a much weaker reading than economists had been expecting.

In a separate report, the Commerce Department said that the US trade deficit shrank last year for the first time in six years.

The gap between imports and exports was $738.6bn (£475bn) for all of 2007.

Recession signs

The deficit is expected to shrink further this year as the US economy slows down.

The weaker dollar is also helping to shrink the deficit by making US exports more attractive and making imports more expensive.

The weak industrial production report has given economists further evidence that the US economy is in trouble.

""The number is a lot worse than expected. Every major category except mining was down pretty substantially," said Cary Leahey, an economist at Decision Economics.

"This report is saying that the economy is in recession in the first quarter," he added.

The US economy is expecgted to slow sharply in the next six months as the credit crunch and the property crash take effect.

The housing market has been hit by falling property prices.

Banks and mortgage providers have suffered because they loaned money to home buyers with poor credit histories, or they invested in financial products backed by those so-called sub-prime loans.

US banks have reported billions of dollars of losses on those investments and that has made them reluctant to loan money - causing the credit crisis which is also hurting the economy.

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