--US Q4 GDP growth slows to 1.4% vs +2.2% in Q3
--US Q4 GDP growth slowest since Q2 1995
--US Q4 final sales +1.6% vs +2.4% in Q3
--US Q4 consumer spending at +2.9%; Q3 at +4.5%
--US Q4 government spending +2.9% vs Q3's -1.4%
--US Q4 capital spending at -1.5% vs +7.7% Q3; largest drop in 9 years
--US Q4 business equipment, software spending -4.7%; +5.6% in Q3
--US Q4 residential spending -2.5% vs -10.6% in Q3
--US net inventories subtract 0.2 pt from Q4 GDP
--US Q4 GDP PCE price index +2.2% after Q3's +1.8%
--US Q4 core GDP PCE price index at +2.0% from +1.1% in Q3
--Q4 GDP price deflator at +2.1% vs +1.6% in Q3
--US net exports subtracted 0.6 pt from Q4 GDP vs -0.9 pt in Q3
--US Q4 personal savings rate record low -0.8% vs -0.2% in Q3
--US 2000 GDP +5.0%; largest increase since 1984

By Simon Kennedy and Andrew Williams, BridgeNews
Washington--Jan. 31--Falling business investment and slower consumer spending dampened the U.S. economy in the final quarter of 2000 as gross domestic product expanded at an annual rate of just 1.4%, the slowest gain since 1995. The expansion undershot the 2.2% growth of the prior quarter and the 1.9% rise projected by economists. Meanwhile, inflation accelerated in the fourth quarter.
* * *
"The deceleration in real GDP growth in the fourth quarter primarily reflected downturns in business investment in equipment and software and in (consumer spending) for goods that were partly offset by an upturn in federal government spending," the Commerce Department said Wednesday.
Capital spending fell 1.5% in the fourth quarter, the largest drop in 9 years and a sharp reversal from the third quarter's 7.7% climb. Investment in equipment and software led the capital spending decline, falling 4.7%.
Meanwhile, consumer spending--which accounts for two-thirds of output-- retreated, rising 2.9% after a 4.5% expansion in the third quarter. Consumer spending growth was the weakest since the second quarter of 1997.
The data confirms Wall Street speculation that the economy faltered into the close of 2000, after beginning the year with a 4.8% growth pace in the first quarter. Such a slowdown, whose speed surprised many analysts, prompted the Federal Reserve to slash interest rates 50 basis points in a shock move Jan. 3.
Fed officials gather shortly to complete a 2-day discussion of the economy.
Amid evidence, in this report and in other indicators, that the economy is still fading sharply they are expected to announced another 50-basis-point rate cut at around 1415 ET Wednesday.
Some analysts even worry that the economy could contract in the current quarter, with a tiny minority forecasting a recession--two quarters of consecutive declining GDP--in the first half of 2001. Fed Chairman Alan Greenspan said last week that after a "very small positive" expansion in the fourth quarter, economic growth is probably now "very close to zero." The incoming Bush administration has also fanned such fears, demanding deep tax cuts in a bid to avert a downturn.

GDP IN DETAIL
Final sales--gross domestic product minus inventory investment--grew at a 1.6% annual pace in the fourth quarter, a slowdown from the third quarter pace of 2.4%. Final sales to domestic purchasers, a measure closely watched by the Fed to gauge the strength of demand, grew 2.1%, versus a 3.2% gain in the prior quarter.
Investment in housing fell 2.5%, following a 10.6% drop in the third quarter.
Total inventories subtracted 0.2 percentage point from growth, the same as in the third quarter. Economists expect firms to continue to pare down inventories, rather than build them up as previously, as they look to balance supply with fading demand.
Net exports of goods and services subtracted 0.6 percentage point from fourth-quarter GDP growth. U.S. exports fell 4.3%, while imports rose 0.5%
Government spending climbed 2.9% in the quarter, reversing a 1.4% drop in the previous quarter. Federal government spending grew 4.6% after dropping 9.0% in the third quarter.
Despite the slowdown in the fourth quarter, for 2000 as a whole, the economy grew 5.0%--the biggest gain since 1984, a Commerce official said. GDP expanded 4.2% in 1999.

INFLATION
Commerce said the GDP implicit price deflator, a widely watched inflation gauge, rose 2.1% in the fourth quarter, up from the third quarter's 1.6% increase.
The GDP price index for personal consumption expenditures, an alternative inflation measure that is more comparable to the consumer price index and so monitored by the Fed, rose 2.2%, topping the 1.8% advance in the third quarter.
Excluding food and energy, the PCE price index climbed 2.0% versus a 1.1% increase in the third quarter.

PERSONAL SAVINGS
The figures show that consumer saving as a percentage of disposable income decreased to minus 0.8% in the fourth quarter--a record low--from minus 0.2% in the prior 3 months.
Total output of goods and services in the fourth quarter was $10.125 trillion. End
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