4Q GDP Growth 1.4%, Slowest in 5 Years

Bloomberg News

WASHINGTON - The U.S. economy expanded in the fourth quarter at its slowest pace in more than five years, the government reported Wednesday; consumer spending cooled, and business investment fell for the first time since 1992.

Gross domestic product, the total of all goods and services produced in the United States, rose at a 1.4% annual rate in the quarter, slower than the third quarter's 2.2% pace, the Commerce Department said.

U.S. government securities and stocks rose after the report showed the economy grew in the second half of 2000 at the slowest annualized pace in five years - a loss of momentum that makes interest rate cuts more likely.

"The extent and the suddenness of the slowdown has caught everyone by surprise," said Oscar Gonzalez, an economist at John Hancock Financial Services Inc. in Boston. "This isn't a crash but certainly is a sudden jolt."

The economy is probably growing even more slowly in the current quarter and may stay sluggish through the first six months of the year, several economists said.

"We have had a very dramatic slowing down, and indeed we are probably very close to zero at this particular moment," Fed Chairman Alan Greenspan said last week during testimony to the Senate Budget Committee.

The economy will probably grow at a 1.5% to 2% annual rate in the first half, according to Richard Yamarone, senior economist at Argus Research Corp. in New York.

After expanding at a 5.9% annual rate in the first six months of last year, the economy slowed to a 2.8% annual growth rate in the second half. This is the slowest growth since a 2.6% from July through December 1995.

Nonresidential investment, which includes commercial construction, business equipment, and software, fell at a 1.5% annual rate, down from a 7.7% rate of increase in the third quarter. The decline was the first since a 0.7% drop in the first quarter of 1992, Commerce officials reported.

Consumer spending, which accounts for two-thirds of gross domestic product, grew at a 2.9% annual rate in the fourth quarter, the slowest since 1.9% in the second quarter of 1997. In the third quarter, consumer spending rose at a 4.5% rate.

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