WASHINGTON – Consumer prices were unchanged in April as both food and energy costs declined to offset gains elsewhere. Prices over the past year fell by the largest amount in more than a half-century, the government said Friday.

The disappearance of inflation has been a product of the country’s deep recession as surging job layoffs dampen wage pressures and weak consumer demand keeps a lid on price increases. Some economists are worried about a dangerous bout of falling prices, but most say that possibility remains remote because the Federal Reserve has responded with force to combat the current downturn.

Meanwhile, the Fed said the nation’s industrial production fell in April by the smallest amount in six months, more evidence that the pace of the economy’s decline is slowing.

The Labor Department said its Consumer Price Index was flat last month, meeting economists’ expectations. The docile inflation performance reflected a second monthly drop in energy costs and a third straight decline in food prices.

Over the past year, consumer prices have fallen 0.7 percent, the largest 12-month decline since a similar drop for the 12 months ending in June 1957.

A destabilizing period of falling prices has not been seen in the U.S. since the Great Depression of the 1930s, although Japan suffered through a period of deflation in the 1990s.

The Fed says output by the nation’s factories, mines and utilities fell 0.5 percent last month, after revised declines of 1.7 percent in March and 1 percent in February. Analysts expected a drop of 0.6 percent last month.

Still, the report showed U.S. industry remains weak. Industrial production has fallen in 15 of the 17 months since the recession began in December 2007, and is down 16 percent since then.

Core inflation, which excludes food and energy, rose 0.3 percent last month, the biggest jump since July. However, 40 percent of April’s gain came from a huge rise in tobacco prices, reflecting an increase in federal taxes.

Consumers in the U.S. and overseas — fearful of losing their jobs or homes — likely will remain cautious spenders in the months ahead, a Fed official said Friday.

“Under these conditions, I envision a slow recovery,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in prepared remarks to a banking convention in San Antonio, Texas. “Not a V-shaped snapback — nor even a U-shaped one — but a very slow slog as we find a more sensible and sustainable mix between consumption and savings and investment.”

Energy prices dropped 2.4 percent in April and are down 25.2 percent over the past 12 months, as prices retreat from record-highs set last spring and summer. Food costs fell 0.2 percent in April as the price of dairy products dropped sharply.

Most economists believe inflation will not be a threat for a prolonged period. The CPI followed a report Thursday that wholesale prices rose 0.3 percent in April, but fell 3.7 percent over the past 12 months, the biggest decline since 1950.

The concerns about deflation are muted in this country because of the aggressive actions taken so far by the Fed. The central bank has pushed a key interest rate to a record low near zero and has taken a number of other measures to flood the banking system with cash to deal with a severe credit crisis.

There are more worries about deflation in other parts of the world. Prices have been falling again in Japan, China and India as the global economy deals with what the International Monetary Fund has said will be the worst global downturn since the 1930s.

A year ago, the Fed was worrying about the threat of runaway inflation as prices for crude-oil and other energy products hit record-highs. But since last fall when the financial crisis hit, the Fed switched its focus to boosting economic growth.

“The recent pressures have been to the deflationary side, though we seem to have beaten that back,” Fisher said.

WASHINGTON – Retail sales fell for a second straight month in April, a disappointing performance that raised doubts about whether consumers were regaining their desire to shop. A rebound in consumer demand is a necessary ingredient for ending the recession.

The Commerce Department said Wednesday that retail sales fell 0.4 percent last month. Many economists had expected a flat reading, and the April weakness followed a 1.3 percent drop in March that was worse than first estimated.

Retail sales had posted gains in January and February after falling for six straight months, raising hopes that the all-important consumer sector of the economy might be stabilizing. But the setbacks in March and April could darken some forecasts because consumer spending accounts for about 70 percent of economic activity.

The hope had been that consumers were starting to feel better about spending, helped by the start of tax breaks included in the $787 billion stimulus bill. Households had spent the fall hunkered down in the face of thousands of job layoffs and the worst financial crisis since the 1930s.

The latest retail data “are yet another illustration that, although the worst is now over, there is still no evidence of an actual recovery,” Paul Dales, U.S. economist with Capital Economics in Toronto, wrote in a research note.

While anecdotal evidence suggests some improvement in sales in recent weeks, “to offset the plunge in wealth, the household saving rate still needs to double from the current rate of 4 percent,” Dales wrote. “With falling employment hitting incomes, this can only be achieved by a further retrenchment in spending.”

The jobless rate rose to 8.9 percent in April when a net total of 539,000 jobs were lost and 13.7 million people were unemployed, the Labor Department said last week.

Wall Street tumbled after the weaker-than-expected retail sales report. The Dow Jones industrial average lost about 130 points in morning trading, and broader indices also fell.

In a separate report, the Commerce Department said business inventories fell 1 percent in March, a decline that matched economists’ expectations. It marked the seventh straight decrease, the longest stretch since businesses cut inventories for 15 straight months in 2001 and 2002, a period that covered the last recession.

Businesses are continuing to cut their stockpiles in the face of declining sales, a development that has intensified the current economic downturn. Still, the reductions in stockpiles held on shelves and in backlots eventually should help businesses get their inventories more in line with reduced sales. If that is the case, any strengthening in consumer demand should lead to increased production.

The April retail sales dip came despite a 0.2 percent increase in auto sales, which fell 2 percent in March. Excluding autos, the drop in retail sales would have been 0.5 percent, much worse than the 0.2 percent gain economists expected.

Sales outside of autos showed widespread weakness last month. Demand at department stores and general merchandise stores fell 0.1 percent and sales at specialty clothing stores dropped 0.5 percent.

Department store operator Macy’s Inc. on Wednesday reported a wider loss for the first quarter due partly to restructuring charges. Still, the company expects to see an improvement in sales from its localization efforts beginning in the fourth quarter of 2009, and in the spring of 2010.

Liz Claiborne Inc. reported a first-quarter loss that was worse than Wall Street expected. The apparel maker said its quarterly loss swelled on restructuring charges and a drop in same-store sales stemming from lower consumer spending and an extra week of sales in the year-ago period.

Sales also fell in April at furniture stores, electronic and appliance stores, food and beverage stores and gasoline stations, according to the Commerce Department.

The performance at department stores and specialty clothing stores came as a surprise since the nation’s big chain stores had reported better-than-expected results for April. Same-store sales, rose 0.7 percent last month compared with April 2008. It was the first overall increase in six months, according to the tally by Goldman Sachs and the International Council of Shopping Centers.

For April, some mall-based clothing stores saw their declines level off and Wal-Mart Stores Inc., the world’s largest retailer, had reported its same-store sales rose 5 percent, excluding fuel, which beat expectations. Same-store sales, or sales in stores open at least one year, is considered a key metric of a retailer’s financial health.

The chain store sales report last week showed that Gap, American Eagle and Wet Seal posted smaller sales declines at their established locations than analysts had forecast.

The Children’s Place, T.J. Maxx owner TJX Cos. Inc. and teen retailer The Buckle saw bigger gains than expected. But luxury stores again were hard hit as their higher-end wares find fewer takers.

Consumer spending grew 2.2 percent in the first quarter of the year, after posting back-to-back quarterly declines in the last half of 2008.

Economists believe the overall economy, as measured by the gross domestic product, will show a decline of around 2 percent in the current quarter. That would represent an improvement from the steep declines of 6.3 percent in the fourth quarter of last year and 6.1 percent in the first three months of this year, the worst six-month performance in a half-century.

WASHINGTON – The U.S. trade deficit rose in March for the first time since last July as the global recession cut sharply into sales of American exports. The politically sensitive deficit with China increased.

The Commerce Department said Tuesday the deficit widened to $27.6 billion in March, slightly lower than the $29 billion gap that economists had forecast.

The March deficit was 5.5 percent higher than February’s revised $26.1 billion trade gap, which had been the smallest since November 1999. Through the first three months of this year, the trade deficit was running at an annual rate of $359.7 billion, far below last year’s $681.1 billion. Economists expect the deficit will remain at low levels this year as a recession in the U.S. crimps demand for foreign goods.

Other reports out Tuesday showed home prices in most of the U.S. fell in the first quarter, which created buying opportunities in some states, while job openings have hit an eight-year low and companies remain reluctant to hire.

The global downturn also has cut into sales of U.S. exports. That will limit the amount of improvement seen in the deficit, which is the difference between what America imports and what it sells abroad. The slump in exports has been a blow to U.S. manufacturing giants such as Boeing Co. and Caterpillar Inc. who derive a large part of their sales from foreign markets.

For March, exports of goods and services fell 2.4 percent to $123.6 billion, the lowest level since August 2006. Sales of farm products dropped $2.4 billion, while exports of capital goods slid $1.7 billion, led by big declines in sales of civilian aircraft, telecommunications equipment, semiconductors, and domestic autos and auto parts.

Imports declined 1 percent to $151.2 billion, the lowest level since September 2004. Imports of capital goods dropped $516 million, led by declines in industrial machinery. The overall import level fell even though imports of oil rose 6.2 percent to $17.2 billion, the highest level since January.

The politically sensitive deficit with China rose 10 percent to $15.6 billion in March, the largest gap since January. China for more than a decade has been the country with the largest trade surplus with the U.S. The gap has triggered repeated calls in Congress for a crackdown on what critics see as unfair trade practices in China that also have resulted in the loss of millions of American manufacturing jobs.

China reported Tuesday that its global export sales fell 22.6 percent in April from the same month last year, fresh evidence that pain in the country’s trade sector persists due to slumping global demand.

The Obama administration earlier this year said it will continue to hold high-level talks with China started by the Bush administration, although the frequency of the meetings was cut in half to once a year. The first meeting is scheduled for this summer in Washington.

With the U.S. recession expected to last until the second half of this year and the downturn in many other nations expected to drag into 2010, economists don’t expect a significant rebound in trade anytime soon.

Meanwhile, home prices in the U.S. also continue to fall, although that has prompted sales gains in a handful of states. The National Association of Realtors said that median sales prices of existing homes declined in 134 out of 152 metropolitan areas compared with the same period a year ago. Nationwide, sales of foreclosures and other distressed properties made up about half of the market.

Home sales fell in all but six states — Nevada, California, Arizona, Florida, Virginia and Minnesota — where buyers have been able to snap up foreclosures at a deep discount. Still, the median sales price nationwide was $169,900, down 13.8 percent from a year ago. The median price is the midpoint, which means half of the homes sold for more and half for less.

The housing slump and latest hit to export sales have added to the wave of job layoffs in the U.S. There were 2.7 million jobs available nationwide in March, down from 3 million in February and 4 million a year ago, according to the Labor Department. That’s also the lowest number in the eight years the department has tracked job openings.

Other recent reports indicate that while layoffs may be slowing compared with the waves announced earlier this year, hiring hasn’t picked up much since the department gathered the job openings data in March.

The department on Friday reported 539,000 net job losses in April. While still elevated, it was the lowest level in six months and below the 700,000 monthly average during the first quarter of this year.

Many economists believe the unemployment rate, which hit 8.9 percent in April, will climb to around 10 percent even if the recession ends and a recovery begins sometime this fall.

Without new hiring, the unemployment rate will continue to rise. That’s because many people who were discouraged and stopped looking for work at the depths of a recession customarily return to the labor market once a recovery begins. If jobs aren’t available, those new job seekers are added to the total of unemployed workers.

WASHINGTON – Wholesalers slashed inventories for a seventh straight month in March as businesses struggled to get stockpiles in line with plunging sales.

The Commerce Department said Friday that wholesale inventories dropped 1.6 percent in March, much larger than the 1 percent fall that analysts had expected. That followed a 1.7 percent drop in February, the largest monthly decline on records that go back 17 years.

Wholesalers also saw sales plunge 2.4 percent in March, the fifth decline in six months.

The drawdown in inventories at all business levels has contributed to a sharp contraction in the economy. The gross domestic product fell at an annual rate of 6.1 percent in the first quarter of this year after a 6.3 percent drop in the final three months of last year, the steepest six-month decline in a half-century.

The ratio of wholesale inventories to sales edged up to 1.32 in March, meaning it would take 1.32 months to exhaust inventories at the March sales pace. That was up from an inventory-to-sales ratio of 1.12 in March 2008.

But economists are hopeful the cutbacks in stockpiles mean that businesses are getting their inventories more in line with sales and that a rebound in consumer demand will trigger increased production.

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.

Wal-Mart Stores Inc. on Thursday reported better-than-expected sales in April, crediting the strength to demand for Easter merchandise and higher store traffic. The Children’s Place, T.J. Maxx owner TJX Cos. Inc. and The Buckle also reported bigger sales gains than expected. And mall-based clothing stores including Gap, American Eagle and Wet Seal reported smaller monthly sales dips than analysts expected.

Consumer spending, which accounts for about 70 percent of total economic activity, posted big drops in the last half of 2008 but grew in the first quarter of this year. That’s one of the positive signs economists have used to support their view that a recovery could occur in the second half of 2009.

However, economists expect a slow recovery with unemployment rising into next year. In a separate report, the Labor Department said Friday that the unemployment jumped to 8.9 percent in April, the highest level since late 1983, as employers cut another 539,000 jobs.

WASHINGTON – New applications for jobless benefits plunged to the lowest level in 14 weeks, a possible sign that the massive wave of layoffs has peaked. Still, the number of unemployed workers getting benefits climbed to a new record.

Retail results also improved as discounter Wal-Mart Stores Inc. and other stores reported April sales figures that beat expectations. Analysts acknowledged the positive economic signals but cautioned that any recovery will be subdued as long as unemployment stays high.

The Labor Department reported Thursday that the number newly laid off workers applying for benefits dropped to 601,000 last week. That was far better than the rise to 635,000 claims that economists expected.

But the total number of people receiving jobless benefits climbed to 6.35 million, a 14th straight record.

The four-week moving average of initial jobless claims, which smooths out volatility, totaled 623,500 last week, a decrease of more than 30,000 from the high in early April. Goldman Sachs economists have said a decline of 30,000 to 40,000 in the four-week average is needed to signal a peak.

Meanwhile, retailers’ business last month was helped by warmer weather, tax refunds, and a shift in the Easter holiday, helping Wal-Mart and many mall clothing chains post better-than-expected results.

But consumer sentiment and business in many areas remains weak, and analysts expect a drawn-out recovery as unemployment remains high and other economic woes persist. Warehouse store operator Costco Wholesale Corp. reported a deeper-than-expected same-store sales drop, hurt by the closing of its stores on Easter.

In a separate report, the government said that productivity, the key ingredient to rising living standards, grew at a 0.8 percent annual rate in the January-March quarter, slightly better than the 0.6 percent increase that economists had expected. Wage pressures, as measured by unit labor costs, increased at a 3.3 percent rate, down from a 5.7 percent spike in the fourth quarter.

While wage pressures outpacing productivity normally would raise alarm bells about inflation, the threat of any price spikes is seen as remote. Regulators and economists are not worried about inflation since many workers are more concerned about keeping their jobs in the recession than demanding higher wages.

On Wall Street, stocks fluctuated following the upbeat labor and retail reports as investors awaited the formal release of results from the government’s “stress tests” of bank balance sheets after the closing bell. The Dow Jones industrial average dipped about 50 points in morning trading and broader indices also slid.

Even with the big drop in new applications for jobless benefits last week, the claims remained at elevated levels. By comparison, weekly jobless claims totaled 372,00 a year ago.

But since peaking at 674,000 in late March, claims have been trending lower, raising hopes that the huge wave of layoffs that have rocked the country could be easing a bit.

Even if the recent declines signal that layoffs have peaked, economists do not expect them to return to pre-recession levels anytime soon. They expect the jobless rate will keep rising through the rest of this year even if their forecasts for an end to the recession in the second half of 2009 are accurate.

The government is scheduled to release unemployment data for April on Friday. Analysts expect the jobless rate will climb to 8.9 percent from the current 25-year high of 8.5 percent. Many analysts expect the jobless rate will hit 10 percent by the end of this year.

The rise in continuing claims to 6.35 million was registered for the week ending April 25, the latest data available. That was up from 6.30 million in the previous week and marked the highest tally on records dating to 1967.

The high level of continuing claims is a sign that many laid-off workers are having difficulty finding work.

More than 5 million jobs have vanished in the recession, and Federal Reserve Chairman Ben Bernanke on Tuesday predicted “further sizable job losses” in the coming months.

Among the states, Michigan saw the largest increase in claims with 9,998 more for the week ending April 25, which it attributed to more layoffs in the automobile industry, according to the Labor Department. The next largest increases were in Massachusetts, Kentucky, North Carolina and New York.

California saw the largest drop in claims with 10,833, which it said was due to fewer layoffs in the construction and service industries. The next biggest declines were in Georgia, South Carolina, Wisconsin and New Jersey.

More companies recently announced job cuts. General Motors Corp. laid out a restructuring plan that includes cutting 21,000 U.S. factory jobs by next year. Microsoft Corp. said it was starting thousands of the 5,000 job cuts it announced in earlier this year and left the door open to even more layoffs. Chip maker Atmel Corp. last week said it would lay off 300 people, or 5 percent of its work force.

WASHINGTON – Productivity rebounded in the first three months of this year while wage pressures eased, both outcomes reflecting the country’s deep recession.

The Labor Department reported Thursday that productivity, the key ingredient to rising living standards, grew at a 0.8 percent annual rate in the January-March quarter, slightly better than the 0.6 percent increase that economists had expected.

Wage pressures, as measured by unit labor costs, increased at a 3.3 percent rate, higher than the 2.8 percent rise that economists had expected but lower than the 5.7 percent spike in the final three months of last year.

The 0.8 percent rise in productivity in the first quarter was a significant rebound from the final three months of last year, when productivity actually fell by 0.6 percent.

The improvement was a reflection of the massive layoffs that have been occurring as businesses struggle to trim costs to cope with a prolonged recession.

The government reported last week that the economy, as measured by the gross domestic product, contracted at an annual rate of 6.1 percent in the first three months of last year after falling by 6.3 percent in the fourth quarter, the worst six-month performance in a half century. GDP measures the economy’s total output of goods and services.

Reflecting the big drop in GDP, the productivity report showed output falling in the first three months of the year. However, the number of hours worked fell at an even faster clip. The combination of falling output and a faster decline in hours produced the improvement in productivity, which measures output per hour of work.

While the 3.3 percent rate of increase in unit labor costs was down from a 5.7 percent jump in the fourth quarter it is still well above the 0.9 percent rise in labor costs for all of last year. But economists believe the unit labor costs figure will decline further in coming quarters as the recession and rising unemployment dampen wage demands.

The recession, which is now the longest in the post World War II period and has eliminated more than 5 million jobs, is keeping a lid on wage pressures. Economists believe that will not change until a sustained rebound has started, something they don’t see occurring until late this year.

Productivity is considered the key ingredient needed for rising living standards because it allows businesses to pay their employees higher wages financed by the increased output. That means companies can increase employee compensation without raising prices.

More companies recently announced job cuts. Microsoft Corp. said Tuesday it was starting thousands of the 5,000 job cuts it announced in earlier this year and left the door open to even more layoffs. Chip maker Atmel Corp. last week said it would lay off 300 people, or 5 percent of its work force.

International Monetary and Financial Committee delegates gather at International Monetary Fund headquarters for the Spring meetings of the IMF and World Bank in Washington, D.C.

Not long ago the International Monetary Fund seemed headed for relic status. Now it’s once more flying high, rolling out ambitious plans to blanket an economically distressed world in dollars. Even grander designs are on the drawing board.

Yet the money might not cover the job and those lofty plans might never get approved.

Failure would carry a heavy political price because the Group of 20 countries have made the lending agency the linchpin in their efforts to combat the worst economic downturn since the Great Depression.

Finance ministers from those nations met over the weekend to hammer out details of the $1.1 trillion plan that President Barack Obama and his G-20 counterparts announced at their recent summit in London.

Major developing nations scored a victory Saturday when the IMF announced that it would sell bonds to help raise a portion of an expanded $500 billion IMF loan fund that is the biggest part of the G-20 support program for the IMF.

China, Brazil, Russia and India had balked at providing contributions under the original approach favored by the United States and Europe.

Even with a deal, however, it’s not clear that the IMF’s pool will have enough to jump-start the economy.

The IMF estimates that before the downturn bottoms out, the agency could provide around $187 billion to recession-battered nations. That would dwarf the $86 billion during the 1997-98 Asian crisis, which leveled countries from Thailand to Russia and Argentina.

The projected lending spree is quite a change from a year ago, when the IMF appeared headed to irrelevance. The long global boom meant countries were coming much less often, hat in hand, seeking assistance.

The IMF was scrambling to pay its bills and trim down. Its major source of income, loan repayments, had fallen sharply.

Today the agency is expanding again, approving loans to a string of countries. It’s not clear whether the boost in resources will be enough.

The key is whether the broken banking systems in the United States and elsewhere can be repaired quickly enough so normal lending can resume to consumers and businesses. This lending is needed to spur an economic rebound in industrial countries, which leads to increased demand for developing nations’ exports.

On Friday, regulators summoned executives from the 19 largest U.S. banks and told them what government tests showed about shortfalls in their institutions’ capital reserves.

Despite the $700 billion bank bailout, credit flows in the United States have not reached the level to get a sustained recovery going.

More problems lie ahead. Banks are struggling not only with billions of dollars in losses on mortgage loans, but also rising bad debt in commercial real estate and consumer credit cards.

“We would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy early last fall,” Treasury Secretary Timothy Geithner said somberly at weekend meetings of the IMF and World Bank.

One of the Obama administration’s main worries is that other countries will not be bold enough in their stimulus efforts or in fixing their own banking systems as loan losses mount.

An IMF study estimate losses on U.S. loans and securities at $2.7 trillion through 2010, double the estimate of six months ago; global losses were put at $4.1 trillion.

The agency also faces questions about how it should change to better cope with the problems of a global economy vastly different from what existed when the institution was created in the 1940s.

Some suggest ideas that would transform the agency into a kind of U.N. Security Council for economic matters, with the power to blow the whistle when economic practices in any country threaten the global economy.

But the IMF has trouble exercising the limited monitoring powers it now has. Rich and poor nations alike bristle at even the mild suggestions contained in the IMF’s annual performance reviews.

Major developing countries such as China, Brazil and India are pushing to obtain greater voting powers at the IMF in line with their growing roles in the world economy. This dispute is threatening to derail the efforts to boost IMF resources.

The battle over tiny changes in voting shares is evidence of the many hurdles to overcome before the IMF can increase its powers as the globe’s economic traffic cop.

Martin Crutsinger has covered economics for The Associated Press for 25 years.

WASHINGTON – Demand for big-ticket manufactured goods and new home sales both were better than expected in March, raising some hopes that the long slides in manufacturing and housing are slowly coming to an end.

The Commerce Department said Friday that orders for durable goods dropped 0.8 percent last month, about half the 1.5 percent decline that economists expected. A rise in orders for commercial and military aircraft helped cushion weakness elsewhere.

The small drop followed a 2.1 percent increase in orders in February. That was the first gain after six straight monthly declines.

New home sales fell 0.6 percent last month to a seasonally adjusted annual rate of 356,000 from an upwardly revised February rate of 358,000, the department said. Economists surveyed by Thomson Reuters expected a sales pace of 340,000 units.

February’s results were 6 percent higher than originally reported, but home sales last month were down nearly 31 percent from March 2008.

The housing results fanned optimism that developers have slashed prices and construction enough that sales have finally hit bottom. Prices, however, are likely to remain weak for months as builders continue to clear out their stock of unsold homes.

While February’s durable goods results were revised down from an earlier estimate of a 3.5 percent gain, that rise in orders followed by only a small drop in March show some faint signs of life in manufacturing.

Still, economists cautioned the best that can be expected is for industrial production to stabilize. They do not expect a rebound from the current low levels anytime soon given all the problems facing the economy.

“The bottom line here is that it is still impossible to tell whether the sharp slowing in the rate of decline of core orders in February-March is simply a correction after the horrors of the previous few, post-Lehman months, or the start of a genuine stabilization,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.

U.S. manufacturers have been hurt by a steep drop in demand at home and from major overseas markets, which face their own recessions.

Diversified manufacturers 3M Co. and Honeywell International Inc. on Friday reported large drops in their quarterly profits and lowered their earnings outlooks for the year. 3M said weak demand from U.S. customers hurt sales of LCD screen coatings, office supplies, steel coatings and other products, while Honeywell said the broader downturn in commercial aviation and autos weighed heavily on its sales.

But on Wall Street, stocks rose after Ford Motor Co.’s better-than-expected quarterly results. The Dow Jones industrial average added more than 70 points in morning trading, and broader indices also rose.

Still, demand for transportation products fell 1.4 percent in March, reflecting a continued slide in orders for motor vehicles, which fell 1.7 percent, according to the government data.

That weakness was offset somewhat by increases of 4.4 percent in demand for commercial aircraft and 4.7 percent in orders for military aircraft. Even with the increase in orders for commercial aircraft, they remain sharply lower than a year ago as the global recession has depressed demand worldwide.

Excluding transportation, orders fell 0.6 percent last month, just half of the 1.2 percent decline that had been expected. Demand also dropped for primary metals such as steel, and for orders of machinery and computers.

While non-defense capital goods excluding aircraft — viewed as a good proxy for business investment plans — rose 1.5 percent, they also were significantly lower than a year ago as businesses have slashed efforts to expand and modernize.

The overall economy, as measured by the gross domestic product, fell at an annual rate of 6.3 percent in the fourth quarter, the biggest decline since 1982. Economists believe the GDP fell almost as sharply in the January-March quarter. They expect a smaller fall in the current quarter as the recession becomes the longest in the post-World War II period.

Paul Ashworth, senior U.S. economist at Capital Economics, said the durable goods data “fits within the broader pattern that we are seeing: the severity of the recession is easing gradually, but any actual recovery is still some way off.”

The lengthy downturn already has resulted in more than 5 million jobs lost in the U.S. since December 2007, and companies still are announcing mass layoffs and extended plant shutdowns.

General Motors Corp. on Thursday said it will temporarily close 13 assembly plants in the U.S. and Mexico, laying off more than 26,000 workers. The closures, which will start in May, will be as short as three weeks to as long as 11.

WASHINGTON – The World Bank, seeking to bolster efforts to fight the worst global economic downturn since the Great Depression, said Thursday it would provide $45 billion over the next three years to support road building and other infrastructure projects in poor nations.

World Bank President Robert Zoellick said the money was designed to support job creation and “help jump start a recovery from the crisis.”

The $45 billion is $15 billion more than the World Bank spent on infrastructure efforts in poor nations compared with the three years before the crisis.

When that money is combined with increased efforts from an arm of the World Bank that supports private sector projects, the increased funding could total $55 billion, the World Bank said. The effort is designed to give developing countries the same type of stimuli rich nations are providing to create jobs in the face of massive layoffs caused by the recession.

The World Bank announcement came as finance officials from around the world were gathering in Washington for three days of discussions beginning on Friday that seek to resolve differences over the best approach to take to combat the current downturn.

European nations are still resisting pleas from the United States for greater increases in stimulus spending, while new economic powers like China and India believe they are not getting the recognition they deserve from old-line organizations such as the International Monetary Fund and the World Bank.

Analysts are not looking for breakthroughs on the major areas of disagreement, but they expect officials will find ways to paper over differences out of fear that signs of too much discord could spook financial markets.

Treasury Secretary Timothy Geithner told a Washington audience Wednesday that he was seeing “some signs of stabilization.” He also sought to defuse anger that it was poorly regulated U.S. markets that wrecked the global economy.

“We bear a substantial share of the responsibility for what has happened, but factors that made the crisis so acute and so difficult to contain lie in a broader set of global forces that built up in the years before the start of our current troubles,” he said.

The discussions are set to get under way Friday with meetings of Group of Seven wealthy nations — the U.S., Japan, Germany, France, Britain, Italy and Canada — followed by talks over dinner that night among the Group of 20 nations, which adds major emerging powers such as China, Russia, India and Brazil to the mix.

In many ways, the task facing Geithner, Federal Reserve Chairman Ben Bernanke and their foreign counterparts is to fill in the blanks from the agreement that President Barack Obama and the other G-20 leaders reached at their summit on April 2 in London.

However, the finance officials may find it just as difficult as the leaders did to patch over all the differences.

The U.S. still believes that countries need to keep pursuing aggressive stimulus efforts in the form of tax cuts and increased government spending to boost demand. European nations contend they already have done enough in this area and they do not want to run up the gigantic budget deficits that Obama has been willing to take on in pursuit of his $787 billion economic stimulus measure.

Another big problem is how to make the numbers from London add up. The G-20 leaders pledged to boost support for the IMF, the World Bank and other international lending organizations by $1.1 trillion. But the biggest chunk of that amount — $500 billion for an emergency lending facility at the IMF — is still short of the goal.

Obama this week asked Congress for authorization to boost the U.S. contribution tenfold to $100 billion, and Europe and Japan have pledged equivalent amounts. However, other major countries, including China, Russia and Saudi Arabia, have not come forward yet with their commitments.

There is hope that the weekend discussions will produce new pledges, but the issue is complicated by the fact that China and other big developing countries like India want to link their increased support to making progress on their long-sought goal for a bigger voice in the operations of institutions like the IMF. This proposal is being resisted by various European nations who would lose some of their current voting powers.

The debate also could hinder efforts to reach agreement on a proposal to sell a portion of the IMF’s vast gold reserves to provide more support for the poorest countries and to expand an IMF currency known as special drawing rights, a move that could provide support to poor nations.

There is general agreement that IMF resources need to be expanded in order to deal with the current financial crisis, which has caused severe hardships in a number of countries. Already the IMF has put together emergency loan programs for Hungary, Serbia, Romania, Iceland, Ukraine, Belarus and Latvia.

Mexico, Poland and Colombia also have announced plans to tap a new, more flexible IMF line of credit designed to support emerging countries that are considered well managed.

Advocates for the poor are urging the finance officials to find ways to resolve their differences and fulfill the commitments made at the G-20 summit.

“What’s happening at this moment is that … capital is drying up for the poorest countries,” said Marita Hutjes, Oxfam senior policy adviser. “We feel it’s part of the responsibility of the rich countries where the financial crisis originated to actually address that problem.”

Underscoring the extent of the challenges, the IMF released a new economic forecast Wednesday that projected that the world economy would shrink 1.3 percent this year, the first decline since World War II, and what the IMF called “by far the deepest global recession since the Great Depression.”

Private economists said an output decline of that magnitude would leave at least 10 million more people jobless around the world.

Associated Press writers Deb Riechmann and Jeannine Aversa contributed to this report.

Federal Reserve Chairman Ben Bernanke

WASHINGTON – Federal Reserve Chairman Ben Bernanke said Friday that financial innovation is good for the economy but must be accompanied by proper regulation.

New financial products, such as subprime mortgages and structured investment vehicles, have become symbols of the economic crisis. The challenge for the government is to come up with regulations that protect consumers without stifling innovation, the Fed chief said.

“As we have seen all too clearly during the past two years, innovation that is inappropriately implemented can be positively harmful,” Bernanke said in a speech to a Fed conference. “It would be unwise to try to stop financial innovation, but we must be more alert to its risks and the need to manage those risks properly.”

The central bank already is moving in that direction with stronger regulations governing credit cards and home mortgage loans, he said, adding that regulators will be doing even more in the wake of the current crisis.

One area regulators need to watch closely is ensuring that complex financial products and services are explained in ways that consumers can understand.

Structured investment vehicles and securities tied to subprime mortgages are among the complex products that contributed to the financial crisis and credit crunch.

SIVs are funds that borrow money by issuing short-term securities at a low interest rate and then lend that money by purchasing long-term securities at higher interest. Investors can profit from the difference, but SIVs began to struggle as demand dried up for short-term bonds during the credit crisis. The value of SIV holdings fell sharply, forcing banks such as Citigroup Inc. that operated the off-balance sheet funds, to provide them with financial support.

High-interest, subprime mortgages made to borrowers with poor credit records exploded in popularity until the housing boom started to burst. The mortgages were packaged into securities snapped up by investors worldwide. Lenders stopped worrying about the creditworthiness of borrowers and offered them ever-riskier mortgages. Many were made by commission-driven mortgage brokers, who had nothing to lose if the loan went bad.

“The challenge faced by regulators is to strike the right balance: to strive for the highest standards of consumer protection without eliminating the beneficial effects of responsible innovation on consumer choice and access to credit,” Bernanke said.

WASHINGTON – Retail sales fell unexpectedly in March, delivering a setback to hopes that the economy’s steep slide could be bottoming out.

The Commerce Department said Tuesday that retail sales dipped 1.1 percent in March. It was the biggest decline in three months and a much weaker showing than the 0.3 percent increase that analysts expected.

A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores.

Meanwhile, the Labor Department reported that wholesale prices plunged 1.2 percent in March as the cost of gasoline, other energy products and food fell sharply.

Gas prices fell 13.1 percent, the steepest drop since December, while food costs dipped 0.7 percent. Excluding volatile food and energy prices, the Producer Price Index was unchanged, below analysts’ forecasts of a 0.1 percent rise.

Federal Reserve Chairman Ben Bernanke said Tuesday there’s been “tentative signs” that the recession may be easing. But he also warned that any hope for a lasting recovery hinges on the government’s success in stabilizing shaky financial markets and getting credit to flow more freely again.

“Recently we have seen tentative signs that the sharp decline in economic activity may be slowing,” Bernanke said. “A leveling out of economic activity is the first step toward recovery. To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets.”

In remarks prepared for students and faculty at Morehouse College in Atlanta, Bernanke mentioned improvements in recent data on home and auto sales, home building and consumer spending as flickering signs of encouragement. But his speech was prepared before the retail sales and other data were released.

On Wall Street, stocks fell Tuesday after the unexpected drop in retail sales outweighed better-than-expected profit reports from Johnson & Johnson and Goldman Sachs Group Inc. The Dow Jones industrial average lost about 85 points in morning trading and broader indices also fell.

In a separate report, the Commerce Department said business inventories fell for a sixth straight month in February. The 1.3 percent decline matched the January drop and was close to the 1.2 percent fall that economists had expected.

Seasonal adjustments could partly explain the unexpectedly weak showing for retail sales. The March 2008 performance had been boosted by an early Easter, while the holiday did not occur this year until April, delaying some shopping.

The overall economy, as measured by the gross domestic product, fell at an annual rate of 6.3 percent in the final quarter of last year, the biggest slide in a quarter-century led by the largest drop in consumer spending in 28 years. Consumer spending is closely watched because it accounts for about 70 percent of total economic activity.

The 1.1 percent drop in retail sales last month followed a revised 0.3 percent increase in February, originally reported as a 0.1 percent fall. Retail sales rose 1.9 percent in January, which followed six straight months of declines.

For March, auto sales fell 2.3 percent, following a 3 percent drop in February. Auto sales in March were 23.5 percent below year-ago levels as automakers struggle through their deepest downturn in decades.

General Motors Corp. and Chrysler LLC have received billions of dollars of support from the government in recent months with the administration demanding more painful restructuring before the companies will get further bailout assistance.

Excluding autos, retail sales fell 0.9 percent after a 1 percent rise in February. That also was worse than analysts’ forecasts of a flat reading for last month.

Sales at appliance stores fell 5.9 percent last month and furniture stores reported a 1.7 percent decline. Sales at specialty clothing stores fell 1.8 percent and dipped 0.2 percent at general merchandise stores, a category that includes Wal-Mart Stores Inc., Target Corp. and Macy’s.

Sales at gasoline stations fell 1.6 percent, while food and beverage stores saw one of the few increases for the month, a rise of 0.5 percent.

Many retailers reported same-store sales declines for March, but some boosted at least the low end of their quarterly guidance including TJX Cos., American Eagle Outfitters Inc., Hot Topic Inc., Aeropostale Inc. and J.C. Penney Co.

Wal-Mart said same-store sales excluding fuel rose 1.4 percent in March, failing to meet analysts’ expectations. The world’s largest retailer blamed the timing of Easter for the miss and said it still expected first-quarter results would be at the high end of its guidance.

President Barack Obama on Friday said the economy was beginning to exhibit some “glimmers of hope.” But many private economists believe the best that can be hoped for is that consumer spending will stop falling and stabilize at low levels.

Analysts believe any significant rebound in sales will require an end to the thousands of weekly layoffs battering the labor market. The economy lost a net total of 663,000 jobs last month, pushing the unemployment rate to 8.5 percent, the highest level in 25 years.

The current recession began in December 2007 and is expected to become the longest downturn in the post World War II period. While many economists believe it could end by this fall, they expect unemployment will keep rising until this time next year, possibly as high as 10 percent.

G-20 summit notable for lack of bold strokes

WASHINGTON – Will it all work? World leaders achieved the minimum at their London summit, cobbling together more resources for the International Monetary Fund and pledging to better regulate unruly financial markets. But no country would budge from its bottom line, so the biggest goals were not met.

Global markets cheered anyway, happy that the Group of 20 leaders were able to demonstrate unity in the midst of the worst financial crisis in decades.

In the end, the ability of President Obama and the other leaders to paper over their differences may turn out to be the biggest achievement of all.

Despite tough talk going into the meetings, including a threatened walkout by French President Nicolas Sarkozy if things didn’t go his way, the leaders emerged with a show of common purpose.

Their final communique even contained a pleasant surprise in the form of a tidy $1.1 trillion pledged to help make sure emerging economies like those in Eastern Europe and Latin America can tap into sufficient resources at the International Monetary Fund to withstand the current turbulence.

That pile of money was easier to obtain because it won’t force the United States or other countries to increase their deficits to supply the additional resources to the IMF. Instead, much of the increased support will come in the form of loans the major countries will agree to provide to the IMF if the agency needs more firepower.

The leaders also pledged to fill in the current gaps in financial regulation that have been laid bare by the troubles that began in subprime mortgage lending in the United States but have now spread to other types of loans not only in the U.S. but around the world.

Obama stood firm against a determined push from Sarkozy and German President Angela Merkel for creation of a global regulator to attack what the Europeans see as a U.S. brand of unfettered capitalism that brought the global economy to its knees.

In the end the U.S. argument prevailed. Instead of the more powerful global regulator, the summit called for better coordination among individual country regulators and increased transparency to provide more oversight of the so-called shadow banking system of hedge funds and other lightly regulated financial entities.

The approach adopted by the G-20 closely follows the outlines of a regulatory overhaul that U.S. Treasury Secretary Timothy Geithner unveiled last week.

Many economists believe this approach offers the best chance of repairing the flaws in the current system quickly, avoiding a long, drawn-out fight over creation of an all-powerful global overseer.

“I think the fact that the G-20 did not go for a global regulator was the right decision,” said Morris Goldstein, a former top official at the IMF and now an analyst with the Peterson Institute for International Economics in Washington. “The key agreement they did achieve was to declare that any systemically important institution, such as hedge funds, will be regulated.”

The G-20 empowered a renamed and expanded Financial Stability Board, which will now include all the member countries in the G-20, to provide guidance and expertise in the regulatory overhaul effort.

Obama and his colleagues made all the right pledges to fight political pressure at home to raise protectionist barriers to protect domestic industries. The G-20 made the same pledge at their first leaders’ summit last November in Washington. But since that time, 17 of the nations at that meeting, including the United States, have moved to protect domestic industries in the current downturn.

Even with that failure of will, analysts said, the problems would be much worse if there wasn’t a G-20 process at work to keep nations from pursing the disastrous policies that turned the stock market crash of 1929 into the Great Depression of the 1930s.

“The main benefit of the G-20 is that it demonstrates that world leaders are working together and have a high level of commitment to quelling the crisis,” said Mark Zandi, chief economist at Moody’s Economy.com.

“They have taken a lesson from the Great Depression when countries didn’t work together and that caused the whole system to crumble,” Zandi said. “No one wants to see that happen again.”

WASHINGTON – Construction spending fell for a fifth straight month in February as another big drop in home building offset a slight rebound in nonresidential construction.

The Commerce Department said Wednesday that February construction activity dropped 0.9 percent, less sharply than the 1.5 percent decline economists expected. Total construction has been falling since October. The level of activity is at the slowest pace in nearly five years.

The weakness in February reflected a 4.3 percent drop in housing construction, which pushed the level down to the lowest in 11 years.

Home builders have cut back sharply, but face a rising glut of unsold homes as record mortgage foreclosures dump more properties on the market. Lennar Corp. said Monday that its fiscal first-quarter losses surged 77 percent due to charges to adjust land and inventory values, and plunging home deliveries and new orders.

The construction report showed non-residential construction rose 0.3 percent in February, a slight rebound following a 4.3 percent drop in January which had been the biggest decline in 15 years.

With the financial sector facing its worst crisis in seven decades, banks have tightened their loan standards, making it harder to get financing for shopping centers and other commercial projects.

More bad news on the housing front came Tuesday when the Standard & Poor’s/Case-Shiller index of home prices in 20 major cities showed a record decline of 19 percent for the three months ending in January compared to the same period a year ago. The biggest declines were in cities already hardest hit by the housing bust including Phoenix and San Francisco.

Still, the National Association of Realtors last week said sales of previously occupied homes unexpectedly jumped in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties. Some economists say that could help moderate declines.

Analysts are forecasting that the commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s. Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or shut their doors.

Construction spending by the government showed a 0.8 percent increase in February following two months of declines. The strength came in an increase of 0.8 percent in spending on federal building projects and a similar 0.8 percent rise in spending on state and local government projects.

All the changes left total construction spending at a seasonally adjusted annual rate of $967.5 billion in February, the slowest pace since March 2004.

WASHINGTON – Orders to U.S. factories for big-ticket manufactured goods unexpectedly rose in February after a record six straight declines, but economists said the gains were unlikely to last as the recession persists.

The Commerce Department said Wednesday that orders for durable goods — manufactured products expected to last at least three years — increased 3.4 percent last month, much better than the 2 percent fall economists expected. It was the first advance since July and the strongest one-month gain in 14 months.

Last month’s strength was led by a surge in orders for military aircraft and parts, which shot up 32.4 percent. Demand for machinery, computers and fabricated metal products also rose.

Still, the rebound may be temporary. Upticks in retail sales and housing starts last month, along with a private sector group’s index of leading economic indicators dropping less than expected were welcomed, but none were viewed as sustainable given all the problems facing the economy. And a large drop in orders to factories in January was revised even lower, bolstering estimates that February data represented a blip.

“Durable goods was firmer than expected but with the caveats of downward revisions and the bounce … coming on the heels of several months of weakness … and we don’t see an effort to interpret it as a sign the economic bottom is in,” RBS Greenwich Capital analyst David Ader wrote in a note.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, agreed. Noting the steep downward revisions in January and that half of last month’s gains came from defense, he said the rise in orders was welcome, but “much less impressive than it looks at first sight and it cannot possibly last.”

“The underlying state of industry is still deteriorating,” Shepherdson wrote in a research note.

But Wall Street rose on the better-than-expected results. The Dow Jones industrial average added about 120 points in morning trading and broader indicators also gained.

Manufacturers have been battered by the current recession — already the longest in a quarter-century — as demand for cars, airplanes, household appliances, furniture and other large goods shrinks both in the U.S. and overseas.

The government is scheduled to report Thursday on the overall economy. Economists believe that data will show the economy falling at an annual rate of 6.5 percent in the final three months of last year, even deeper than the 6.2 percent drop in the gross domestic product reported a month ago.

Economists believe the GDP fell just as sharply in the current quarter and likely will keep contracting until the second half of this year.

Still, orders for durable goods excluding the volatile transportation sector rose 3.9 percent last month, easily beating the 2-percent drop that economists expected.

But despite the big surge in demand for military aircraft, overall orders for transportation products fell 0.8 percent in February. Demand for commercial aircraft plunged 28.9 percent after a huge increase in January. Orders for autos and auto parts dipped 0.6 percent as that industry’s struggles persist.

Detroit’s General Motors Corp. and Chrysler LLC are restructuring operations in hopes of securing billions more in federal aid.

In areas of strength, orders for heavy machinery surged 13.5 percent in February, demand for computers rose 10.1 percent and orders for fabricated metal products edged up 1.5 percent.

Treasury Secretary Timothy Geithner

WASHINGTON – The Obama administration launched a new effort Monday to end a paralysis in lending, saying it will team with investors to initially buy up to a trillion dollars of bad assets from banks that have been reluctant to make loans to consumers and companies.

In announcing the program, Treasury Secretary Timothy Geithner pleaded for patience, saying that work to rehabilitate an industry with such systemic problems must go forward despite “deep anger and outrage” over executive bonus payments.

Geithner’s performance in President Barack Obama’s Cabinet has come under heavy criticism from some in Congress. The secretary announced the initiative in a Treasury Department room with no cameras allowed. He was with Obama later in the morning, however, when the president spoke briefly, saying he was “very confident” the latest plan will succeed.

Obama called it “one more critical element” in a multi-pronged effort to revive the economy and said the depressed housing market is beginning to show glimmers of hope.

Geithner said the new program will initially seek to harness government and private resources to purchase a half-trillion dollars of bad assets off the balance sheets of banks and said he expects that purchases eventually could grow to $1 trillion.

Wall Street seemed to feel rejuvenated, at least at the opening. In late morning, the Dow Jones industrial average was up 221 at 7,500. Reaction to an earlier administration bank rescue program on Feb. 10 was anything but enthusiastic, with dispirited investors sending the Dow Jones plummeting by 380 points.

The administration’s newest toxic-asset repellant was another in a string of banking initiatives that have included efforts to deal directly with mortgage foreclosures, boost lending to small businesses and thaw out the credit markets for many types of consumer loans.

Administration officials said the plan put forth Monday will deploy $75 billion to $100 billion from the government’s existing $700 billion bailout program for the purchase of bad assets — resources that will be supported by loans from the Federal Deposit Insurance Corp. and a loan facility being operated by the Federal Reserve.

Under a typical transaction, for every $100 in soured mortgages being purchased from banks, the private sector would put up $7 and that would be matched by $7 from the government. The remaining $86 would be covered by a government loan provided in many cases by the Federal Deposit Insurance Corp.

Whereas Geithner suggested there was no alternative to the plan, Republicans said otherwise. House GOP Whip Eric Cantor said he hoped the administration would consider instead an earlier GOP proposal to set up a government-sponsored insurance program for mortgage-related securities.

Cantor, R-Va., called Obama’s plan a “shell game” that hid the true cost.

“As described, the plan seems to offer little incentive for private investors to participate unless the subsidy is made so rich that it comes at the expense of the taxpayer,” Cantor said in a statement.

Geithner was scheduled to testify on Tuesday before the House Financial Services Committee.

The secretary defended the decision to have the government carry so much of the risk. He said the alternative would have been to do nothing and risk a more prolonged recession or have the government carry all of the risk.

Geithner also said there would be significant advantages from having private market participants bidding against each other to set prices for which the bad assets will be purchased. “There is no doubt the government is taking risks,” he told reporters. “You can’t solve a financial crisis without the government taking risks.”

Devising bailout plans has never been easy work, and the brouhaha surrounding millions in executive retention bonuses paid out by financially strapped American Insurance Group, Inc., hasn’t improved the political atmosphere.

Officials said they expect participation by a broad array of investors ranging from pension funds and insurance companies to hedge funds. To achieve that goal, the program would be set up to entice private investors with low-cost loans provided by the Federal Deposit Insurance Corporation and the Federal Reserve. The government itself would shoulder the bulk of the risk.

Geithner has said that the country cannot afford to simply wait for banks to work off these bad assets over time.

Christina Romer, who heads the White House Council of Economic Advisers, said: “It’s absolutely about helping a system so that people can get their student loans, and that families can buy their house and buy their cars, and small businesses can get their loans.”

The government has been struggling since the credit crisis hit last fall to figure out a way to sop up the bad assets, many of them involving home loans. Former Treasury Secretary Henry Paulson never did come up with a solution and the Obama team has been wrestling with the same thorny problems of how to price the assets and make sure the government’s resources are up to the task.

The program surfaced after a week of Wall Street-bashing in Congress, where lawmakers were outraged with the action by troubled insurance company American International Group Inc. to distribute $165 million in bonuses after obtaining more than $170 billion in government bailouts to remain in business.

Some hedge funds and other investors have expressed reluctance to participate in the new program for fear that Congress will subject them to what they view as onerous restrictions on executive compensation.

But administration officials insisted that they believe they have found the right mix to attract private investors and make a dent in what, by some estimates, could be more than $2 trillion in troubled assets on banks’ books.

They said the program has the capacity to purchase $500 billion and possibly as much as $1 trillion in troubled loans, which go back to the collapse of the housing boom and the subsequent tidal wave of foreclosures.

But private analysts believe that with the $700 billion bailout fund nearly tapped out by capital disbursements to banks and lifelines provided the auto companies and AIG, there are only enough resources left to get the asset purchase program launched.

Mark Zandi, an economist with Moody’s Economy.com, estimated the government will need another $400 billion to make a sufficient dent in the bad asset problem.

Administration officials said they want to get the new program launched and see how successful it is before deciding whether to ask Congress for more resources.

The administration included a placeholder in its budget request to Congress last month for an additional $750 billion, more than doubling the financial rescue effort, but many lawmakers have said the current bailout fatigue among voters dims the prospect of getting further resources.

According to administration officials, the toxic asset program will include a public-private partnership to back private investors’ purchases of bad assets, with government support coming from the $700 billion bailout fund. The government would match private investors dollar for dollar and share any profits equally.