Economy posts weak showing in '07
Published: Thursday, January 31, 2008 at 6:01 a.m.
Last Modified: Wednesday, January 30, 2008 at 8:29 p.m.
WASHINGTON- The economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.
Wednesday's Commerce Department report showed that the economy deteriorated considerably during the October-to-December quarter as worsening problems in the housing market and harder-to-get credit made individuals and businesses more cautious in their spending. Fears of a recession have grown, even as inflation remained elevated.
For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse was the biggest culprit; builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
The gross domestic product report for the last quarter of 2007 came as the Democratic-run Congress and the Bush administration continued to work on a program of tax rebates and business incentives.
To help bolster the economy, the Federal Reserve on Wednesday sliced a key interest rate by a bold half-percentage point, its second reduction in eight days.
The fourth-quarter's performance was much weaker - half the pace that economists were expecting.
The 0.6 percent annualized increase in gross domestic product (GDP) marked a big loss of momentum from the third quarter's brisk, 4.9 percent showing. The fourth-quarter pace was the slowest since the first quarter of last year.
GDP measures the value of all goods and services produced within the United States and is the best barometer of the country's economic health.
In the fourth quarter, consumer spending slowed to a pace of 2 percent, down from a 2.8 percent growth rate in the prior quarter. For all of last year, consumers boosted spending by 2.9 percent, the smallest increase since 2003.
Businesses also watched their spending more closely during the final quarter of last year. Fearing a lessening appetite from their customers, they cut inventories of goods. That shaved 1.25 percentage points from fourth-quarter GDP, the most in a year.
Sales of U.S. goods and services abroad also slowed sharply in the fourth quarter. For all of 2007, exports grew by 7.9 percent, the slowest in two years.
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