Remember that by 3.5 rules, they have to burn xp to make items normally. I think they're doing away with that in 4th edition, but as I understand it, a wizard would only be able to expend the xp they've acquired in their most recent level.. they can't lose levels by making items. So that means they'd still have to go out adventuring from time to time to get more xp.
So it's a bit strange, but not inherently economy-destroying.
You only pay xp for magic items, the only requirement for mundane items is time, which is essentially negated by fabricate. So you have an infinite source of mundane items, so long as they are made of - Iron, Stone or Vegetative Matter [it doesn't specify which, as long as its vegetative matter, which lets you have wood, food, drugs / poisons].
Incidently you can also get huge volumes of "Flesh", but i'm not sure what you would do with that as it doesn't specify what kind of flesh, or if its edible. [The old wall of stone spell, followed by a stone to flesh spell]
In short, anything that lets you have infinite anything for nothing, is bad, in my not very humble opinion.
Admittedly though, the thought of the Dwarves finding out their entire mining operation has been replaced by mid level wizards does tickle me.