US economic growth slows to 0.6% crawl

WASHINGTON: Growth in the world’s biggest economy slowed to a 0.6% annual pace in the fourth quarter of last year amid a worsening housing slump and a related credit squeeze, the government said on Wednesday.
The commerce department survey was worse than expected as most economists had only expected gross domestic product (GDP) growth to slow to around 1.2% during the last three months of 2007.
Growth shifted abruptly from a 4.9% annualised clip in the third quarter, decelerating to its weakest rate since the fourth quarter of 2002.
The weaker-than-expected growth snapshot comes amid mounting fears that the giant US economy could be slipping into a recession.
“It’s a little weaker than expected. The bottom line is that the economy was losing momentum late last year and we think it will slow further as consumer and business spending will slow,” Sal Guatieri, an economist at BMO Capital Markets, said.
The report was released hours before the Federal Reserve was widely expected to announce another cut in US interest rates in a bid to underpin economic momentum.
The Fed embarked on a rate-cutting drive last September as major banks began divulging billion dollar losses related to mortgage investments.
The banks’ losses triggered a credit crunch which has plagued the financial system.
The central bank’s federal funds rate was presently anchored at 3.50% after the Fed slashed the rate by an historic three quarters of a percentage point last Tuesday.
The government’s initial reading of fourth quarter growth, which was subject to revision, showed that the housing slump acted as a major drag on overall growth. – AFP