US economy brakes to 4.0-percent growth ( 2004-01-31 11:17) (Agencies)
The US economy braked fiercely in the last quarter of 2003 to an unexpectedly
slow 4.0-percent annualized growth pace as consumer spending deflated, data
showed.
Growth shrank to less than half the blistering, 19-year record 8.2-percent
pace of the third quarter, defying economists' predictions of a 5.0-percent
expansion to wrap up the year.
"It is weaker than expected but not a whole lot to fuss about," said BMO
Financial Group senior economist Sal Guatieri.
"The report might indicate that the economy is losing a little momentum but
you are coming off a very strong quarter."
Over the whole of 2003, output in the world's biggest
economy was up 3.1 percent, the U.S. Commerce Department said.
It was the fastest annual growth rate since 2000, before business and
consumers suffered multiple shocks: the September 11, 2001 attacks, massive
corporate scandals and the fog of the Afghan war.
But the
end-of-year slowdown appeared to confirm the worries of Federal Reserve chairman Alan Greenspan, who is
clinging to 45-year-low interest rates until the economy ignites a jobs boom.
Greenspan and his colleagues voted unanimously Wednesday to hold the key
federal funds target rate unchanged at 1.00 percent, the lowest since 1958.
With economic output expanding "briskly,"
however, the Federal Open Market Committee (FOMC) members replaced wording in earlier
statements that they would be able to keep rates super low for a "considerable
period."
Instead, members said they could afford to be "patient."
Speculation about a reversal in the three-year cycle of interest rate
cuts, which slashed 5.5 percentage points off the federal funds rate, has
stepped up in tandem with the pace of the economy.
Consumers, whose spending accounts for two-thirds of US economic
activity, were blamed for the end-of-2003 slowdown.
People cut spending to a 2.6 percent growth pace in the last quarter of
the year, compared with an increase of 6.9 percent in the previous three months,
as buyers steered clear of car showrooms, the Commerce Department said.
Investment growth also slumped in the quarter.
Business investment in structures such as factories grew 6.0 percent,
down from a 12.8 percent surge in the previous quarter. Spending on equipment
and software rose 10 percent, down from 17.6 percent. Housing investment rose
10.6 percent, down from 21.9 percent.
And federal government expenditure edged up only 0.7 percent, down from
1.2 percent growth the previous growth.
But the country also enjoyed a 19.1 percent surge in exports in the
fourth quarter, nearly double the 9.9 percent rate of the third quarter, helped
by the weaker dollar making US goods more competitively priced overseas.
Final sales -- a sum of total demand in the economy -- rose 3.4 percent in
the last quarter of the year, down from the previous quarter's 8.3 percent boom.
Prices paid by consumers rose 1.1 percent, down from a
1.6-percent increase in the third quarter.
