Economy Slowed to Near Crawl, Minuscule 0.6 Percent Growth Rate in 4th Quarter

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The Commerce Department reported Thursday that the gross domestic product increased at a scant 0.6 percent pace in the October-to-December quarter. The reading -- unchanged from an initial estimate a month ago -- underscored just how much momentum the economy has lost. In the prior quarter, the economy clocked in at a brisk 4.9 percent pace.

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The housing picture looked even more bleak in the new report.

Builders slashed spending on housing projects by a whopping 25.2 percent on an annualized basis in the fourth quarter, the biggest cut in 26 years.

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As if the newly confirmed fourth-quarter GDP figure of 0.6 percent wasn't chilling enough, the Labor Department reported Thursday that new applications for unemployment insurance benefits rose by 19,000 to 373,000 last week, more evidence that the general economic sluggishness is spilling over into the job market.

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The National Association for Business Economics expects economic growth in the current January-to-March quarter to slow to a meager 0.4 percent pace. Some analysts believe the economy's performance could be even worse and actually shrink during this period.

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A gauge of inflation linked to the GDP report showed that "core" prices -- excluding food and energy -- grew at a rate of 2.7 percent in the fourth quarter. The inflation reading -- although unchanged from the government's initial estimate -- showed that inflation had picked up sharply from the third quarter's 2 percent pace.

The inflation figure is above the Fed's comfort zone -- the upper bound of which is a 2 percent inflation rate.

http://biz.yahoo.com/ap/080228/economy.html