U.S. Economic Growth Skids To Five-Year Low

U.S. growth skidded lower in the fourth quarter and was the weakest in five years for all of
2007, according to a government report on Wednesday that highlighted the toll an enfeebled housing sector has taken on the national economy.


Gross domestic product, which measures total goods and services output within U.S. borders, edged up at a weaker-than-expected 0.6 percent annual rate in the fourth quarter and for the full year advanced only 2.2 percent - the slowest growth in annual GDP since 1.6 percent in 2002.

Analysts surveyed by Reuters had forecast that fourth-quarter GDP would grow at a 1.2 percent rate. The lackluster fourth quarter performance followed a booming third quarter when GDP surged at a 4.9 percent rate and is likely to fuel fears the economy is at risk of tumbling into recession in 2008.

Spending on new-home building plunged 23.9 percent in the fourth quarter, the biggest quarterly drop in 26 years, after falling 20.5 percent in the third quarter. Over the course of
the full year, residential spending fell 16.9 percent, the worst annual performance since 1982.

There were also signs that prices were bubbling higher as a gauge favored by the Federal Reserve - personal consumption spending excluding food and energy items - gained at a 2.7
percent annual rate in the fourth quarter. That was well ahead of the third quarter's 2 percent increase and Wall Street expectations. It was the biggest increase for any three months
in 1-1/2 years.

The Fed already has cut U.S. interest rates by 1-3/4 percentage points since last fall and is expected to announce later on Wednesday that it is reducing them again, while the Bush administration is negotiating with Congress on a fiscal stimulus package to try to spur growth.

Consumer spending, which fuels more than two-thirds of U.S. growth, held up relatively well in the fourth quarter, growing at a 2 percent annual rate compared with 2.8 percent in the third quarter. But growth in consumer spending for the full year 2007 was the softest since 2003, a further indication that weakening housing prices and markets are putting a strain on
household finances and confidence.