New numbers point to slowing North American economy

A trio of newfiguresreleased Friday could addto North America'sgrowing economic headache.

U.S. retail sales dropped unexpectedly while that country's wholesale price index experienced its biggest decline in two years.

Meanwhile, Canadian industry operated atcapacity levels more than five per cent lower in the second quarter of 2008 compared to the same period in 2007.

All told, these numbers reinforced the weakening trade picture in Canada and the United States shown by other economic figures in the past week, and indicated a continentaleconomy that is either flat or slightly negative.

Not all the news was bad. The University of Michigan's initial reading on September consumer confidence rose to 73.1 from 63 in late August. Economists had forecasta rise to 64.

U.S. retail picture weakens

U.S. retail sales slipped 0.3 per cent in August, the second month in a row that this indicatorposted negative growth, according to figures released by the Commerce Department. Analystsexpectedagainof 0.3 per cent.

July'sretail sales slippedeven more,0.5 per cent, according to revisions to those figures also releasedFriday.

Once car sales were subtracted, the August retail performance in the United States worsened, down 0.7 per cent in the non-auto sectors. That was the poorest performance since December.

Expertssaid economic uncertainty combined with falling real estate prices had consumers zipping up their wallets in August.

Meanwhile, the Labour Department said U.S.wholesale prices fell by 0.9 per cent in August, nearly double the 0.5 per centdropeconomists had expected andthe largest one-month declinesince October 2006.

Dropping oil costs have startedtotranslate into falling prices at the loading dock, analysts said.

Sliding wholesale prices often are considereda signof lower inflation at the retail level and, thus, a positive factor.

In recent weeks, however, investors haveinterpreted indicationsof lower inflation, such as sliding crude prices,as a drop in overall consumer and business demand and thus a signthatthe economy is sliding into a recession.

Canadian capacity nears 1992 low

Statistics Canada said the country's industrialized capacitylevel fell in the second three months of the year compared to the first quarter of 2008 and compared to the second quarter of 2007.

This figure measureshow close Canada's companies are to operating at full capacity.

Canada's industrial index now stands at 78.9 per cent versus 79.6 per cent for the January-to-March period of 2008.

The latest numbersalso show an economy operating close to its lowest capacity level in 16 years, 78.6 per centin 1992.

Evenmore telling is the comparison of the current quarter tosame time last year when Canada's industrial capacity stood at 84.1 per cent.

That means the country's factories are operating with five per cent more slack than this time last year.

The recent woes of Canadian manufacturers were reflected in the quarterly figures with the sector operating at 76.7 per cent of capacity compared to 77.2 per cent in the previous quarter.

Indeed, the situation among makers of wood products is downright miserable, according to Statistics Canada.

There, industry is operating at 66.5 per cent, the lowest point since the first quarter of 1991.