The U.S. economy grew at a 1.6% annual pace in the fourth quarter, a bit faster than previously thought, while core inflation was a touch lower, the Commerce Department said Tuesday. In its second estimate of real seasonally adjusted gross domestic product, the government said inventory rebuilding accounted for all of the growth in the economy during the quarter. Final sales were flat, the weakest since the first quarter of 2002. A month ago, the government had said GDP increased at a 1.1% annual pace, with final sales falling 0.3%. The slowdown from 4.1% in the third quarter was largely due to weak auto sales, slower business investment, a rise in imports and a drop in federal spending. The revisions were just as expected by economists surveyed by MarketWatch. Inventory rebuilding was revised higher, as was spending by consumers, businesses and governments. The trade deficit was more of a drag than in the earlier estimate. Economists say the fourth-quarter slump was just a temporary bump in the road, due largely to the sharp drop off in auto sales and the ripple effects of Hurricane Katrina. For the first quarter, economists are predicting growth of 4.6%. From the fourth quarter of 2004 to the fourth quarter of 2005, the economy grew 3.2%, the slowest year-over-year growth in nine quarters, but just about the long-term sustainable rate. The economy grew 3.5% in all of 2005 compared with 2004. In nominal terms, GDP totaled $12.49 trillion in 2005. Core inflation - which excludes food and energy costs - increased at a 2.1% annual rate in the quarter, down from 2.2% in the earlier estimate. Over the past year, the core personal consumption expenditure price index has increased 1.9%, at the top end of the Federal Reserve's comfort zone. The report is likely to have little impact on the Fed's deliberations in four weeks about whether to boost overnight lending rates for the 15th straight meeting. Financial markets and economists are nearly unanimous in predicting a rate hike to 4.75%, but after that, the Fed's course becomes murkier, with incoming data on inflation, jobs and housing the keys to policy. In the fourth quarter, consumer spending increased 1.2%, up from 1.1% previously. Spending on durable goods fell 16.6%, the biggest drop in 19 years. Capital spending on equipment and software increased 6.2% annualized, significantly higher than the 3.5% growth estimated earlier. Investments in homes increased 2.6%, down from 3.5% earlier. Investments in business structures increased 3.3%, up from 0.7% earlier. Government spending fell 0.7%, including a 2.6% decline in federal spending. In the previous estimate, government spending reportedly fell 2.4%, including a 7% drop in federal spending. Inventories increased by $30.4 billion, adding 1.6 percentage points to growth. The nation's trade imbalance subtracted 1.4 percentage points from growth, as imports grew 12.8% while exports increased 5.7%. Personal incomes were also revised higher. For the third quarter, incomes increased 0.6% vs. 0.4% earlier, with wages rising 1.6% vs. 1.2% earlier. For the fourth quarter, incomes increased 2.3%, with wages up 1.2%.