U.S. Economic Worries Continue

With a worse-than-expected report on U.S. inflation for January, the same deep pessimism that has pushed consumer sentiment down showed up in the stock market, and the benchmark Dow Jones Industrial Average plunged 204 points by its close Wednesday.

The technology-heavy Nasdaq only fell 49 points, but that dropped it to a two-year low and wiped out an early day rally.

The Labor Department said its consumer price index rose 0.6% last month, driven mainly by natural gas and electricity costs. The markets had looked for just a 0.3% rise. The core CPI, minus volatile food and energy components, gained only 0.3%, while markets generally expected 0.2%.

This raised fears that the Federal Reserve may be too constrained by inflation fears to keep cutting interest rates so sharply as it did in January, in order to get the economy perking again soon. The Fed made two half-point cuts last month, and had been seen as likely to cut rates another half-point in March.

Lower interest rates can spur freight shipments over time, but for many trucking companies they help the bottom line right away by paring the debt-carrying cost on fleet equipment.

Meanwhile, the Commerce Department said Wednesday that both exports and imports shrank during December, narrowing the trade gap but serving as a reminder that demand and production are down. To trucking companies, a slower international-trade market means slower freight shipments between manufacturers and ports, or from ports to warehouses and retail stores.

All this follows last Friday’s reports that industrial production fell again in January, and that the University of Michigan’s consumer sentiment gauge fell to its lowest level since 1993.

Fed Chairman Alan Greenspan has warned that a weakening in consumer attitudes could cause the economic slump to get worse.

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