By Pedro Nicolaci da CostaNEW YORK (Reuters) - U.S. Mid-Atlantic factory production slumped to its lowest level since the last recession, while an index of future economic activity pointed to even tougher times ahead.The Philadelphia Federal Reserve's business activity index slumped to -24.0 this month -- the lowest since February 2001 -- from an already weak -20.9 in January.The reading was worse than even the most pessimistic Wall Street forecast, and suggested economic deterioration is happening even more rapidly than many expected as the housing downturn continues unabated."This is clearly pointing to an economy that is in recession," said Eric Green, economist at Countrywide Financial in Calabasas, California.Readings below zero represent contraction in the region's industrial sector, which many believe could be in recession. National data have been less dire, suggesting some regions are suffering more acutely from the housing slump than others.The softness was pervasive and looked to be getting worse, with the index of six-month business conditions falling to its lowest level since 1990. New orders remained in negative territory but improved to -10.9 from -15.2, although employment did turn positive after a January dip.The Conference Board's index of leading U.S. economic indicators fell for a fourth straight month in January, dropping 0.1 percent and corroborating the weakness seen elsewhere in the economy."Four monthly declines in a row ordinarily is taken as an indicator of a manufacturing recession," said Pierre Ellis, a senior economist at Decision Economics in New York.These concerns drove the stock market sharply lower and triggered a rally in the U.S. Treasury bond market. The Dow Jones industrial average fell 142.96 points, or 1.2 percent, to 12,284.30 at the closing bell.Data earlier in the day showed the number of U.S. workers applying for jobless aid last week fell to 349,000 from an upwardly revised 358,000, but the less volatile four-week moving average of these applications stood at the highest level in more than two years, government data showed.Economists polled by Reuters were expecting the weekly jobless claims numbers to increase slightly to a seasonally adjusted 350,000 for the week ended February 16 from the Labor Department's earlier estimate of 348,000.The four-week moving average, which irons out weekly fluctuations in the data, rose to 360,500 from 349,750 in the previous week, which was the highest level since October 2005 in the aftermath of Hurricane Katrina.(Reporting by Pedro Nicolaci da Costa; Editing by JanPaschal)
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