WASHINGTON, March 27 - The U.S. economy braked sharply at the end of last year as consumer spending slowed and exports dropped off, the government said on Thursday in its final snapshot of fourth-quarter growth. U.S. gross domestic product rose at an annual rate of 1.4 percent in the final three months of last year after advancing a robust 4 percent in the third quarter, the Commerce Department said. The weak fourth-quarter reading was unchanged from a preliminary report released a month ago, as economists on Wall Street had expected. For the year as a whole the economy grew a modest 2.4 percent, not enough to generate new jobs but a good bit better than the 0.3 percent gain in recession-bound 2001. "There were modest, roughly offsetting, revisions to several components of GDP," the department said of the final fourth-quarter reading.
Consumer spending rose at a 1.7 percent pace in the October-December period, a touch stronger than reported a month ago but a sharp slowdown from the third quarter's 4.2 percent gain -- a reflection of a big drop in auto sales. In addition, exports plunged at a 5.8 percent rate while imports rose 7.4 percent, effectively supplanting some domestic production. The department said the trade gap had the impact of shaving 1.59 percentage points from GDP growth. Still, there were some bright spots.
Business investment spending increased 2.3 percent, its first gain since the third quarter of 2000. Spending on equipment and software rose for a third consecutive quarter and businesses cut back less sharply on spending for structures compared to the prior three months. A decline in capital outlays by businesses led the economy into recession in early 2001 and a revival is considered crucial for a sustained, broad-based recovery. Housing also was a bright spot with spending on residential structures up a strong 9.4 percent Businesses increased inventories by $25.8 billion, a bit more than in the third quarter, which helped give a slight boost to growth. Government spending also increased. While most analysts had expected the U.S. economy to pick up the pace early this year, a series of disappointing economic reports have led forecasters to scale back their projections. However, forecasters are uncertain to what degree recent weakness reflects bad weather and war as opposed to more fundamental economic woes. The report showed inflation well contained. The price index for consumer spending -- the Federal Reserve's favorite inflation measure -- rose at a 1.8 percent annual rate in the fourth quarter and was up just 1.5 percent when volatile food and energy prices are excluded. A senior Fed staff member said earlier this week that measure may overstate inflation by about 0.5 percentage point.
With inflation a distant concern, the central bank has been able to act aggressively in lowering interest rates to try to spur growth.//