Economy Sinks in Nearly Half of States

MoneyNews
Wednesday, Jan. 23, 2008

NEW YORK -- Economic activity shrank in nearly half of the states in December, data from the Philadelphia Federal Reserve showed, reinforcing views the United States might be slipping into a broad-based U.S. recession.
The regional Fed bank's coincident index, which gives an serves as a proxy for state-by-state gross domestic product, showed a decrease in 23 states last month, according to data released on Tuesday.

Growth was stagnant in seven other states, the data showed. Of the 50 states, indexes for Nevada and Michigan have been down for six consecutive months.

"I would say that these states are experiencing extended periods of negative growth," said Jason Novak, senior economic analyst at the Philadelphia Fed.

Concern over an economic downturn has been fueled by a protracted decline in the housing sector, and financial market turmoil including a more than 10 percent decline in equity prices since the start of the year.

The Fed's most recent Beige book noted that regional economic activity increased modestly late last year, but at a slower pace.

The U.S. central bank is not optimistic in its outlook. While the Fed is not predicting a recession — technically two consecutive quarters of contraction — it sees the risk of much slower growth this year.

"Increasing downside risks to growth" were cited for the Fed to cut benchmark interest rates by a hefty three-quarters of a percentage point in an emergency move on Tuesday.

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