North American stocks are expected to open sharply lower Thursday, with worries about the U.S. economy triggering significant retreats in global markets.

International stock markets stumbled, with the Nikkei 225 ending 3.3% lower in Tokyo and the FTSE 100 losing around 2% in midmorning London action.

Here at home, Canadian industries reduced their use of production capacity in the fourth quarter, with the utilization rate falling to its lowest level in more than 10 years. The manufacturing sector, which continues to be hard hit by the appreciation of the Canadian dollar, was a major factor in this decline.

Statistics Canada reported today that industries operated at 81.8% of their capacity, down from 83.4% in the third quarter. The current rate is well below the most recent high of 87.1% reached in the fourth quarter of 2000.

Separately, the government agency said Canada’s net international investment position continued to deteriorate in the fourth quarter, fuelled by the largest inflow of foreign direct investment in eight years.

StatsCan said net foreign debt rose by $13.3 billion in the fourth quarter to $156.3 billion at the end of 2007, representing 10.0% of Canada’s gross domestic product, up from 9.1% in the previous quarter.

South of the border, U.S. retail sales took an unexpected tumble during February, raising recession fears.

Retail sales decreased by 0.6%, the U.S. Commerce Department said today.

Economists had estimated a 0.1% increase in February retail sales.

Meannwhile, U.S. import prices rose sharply last month when volatile oil prices were excluded, suggesting that the steady rise in energy and food prices as well as the weak dollar are feeding more broadly into the prices of other goods.

U.S. Initial claims for jobless benefits were unchanged at 353,000 after seasonal adjustments in the week ended March 8, the Labor Department reported today.

Gold edged toward the key US$1,000 level, with futures up US$9.50 to US$989 an ounce. Oil futures eased 12¢ to US$109.80 a barrel.

On Wednesday, the S&P/TSX composite index fell 47.18 points, or 0.35%, to close at 13,297.35.

The junior S&P/TSX Venture composite added 5.85 points, or 0.22%, to end at 2,673.22.

In New York, early gains dwindled and markets closed in the red, after oil topped $110 a barrel in mid-day trading.

The Dow Jones industrial average shed 46.57 points, or 0.38%, to end at 12,110.24.

The S&P 500 lost 11.88 points, or 0.90%, to close at 1,308.77.

Meanwhile, the tech-heavy Nasdaq composite index fell 11.89 points, or 0.53%, at 2,243.87.