Advance 4Q GDP Rises at 0.6% Rate

WASHINGTON — U.S. gross domestic product rose only 0.6% at a seasonally adjusted annual rate in the fourth quarter, a much slower pace than the 4.9% gain in the previous quarter, reflecting slower growth virtually across the board, the Commerce Department’s advance estimate released yesterday showed.

The chain price index rose 2.6% in the fourth quarter after a 1.0% rise in the third quarter, Commerce reported. At the same time, the closely watched core personal consumption expenditure price index rose 2.7% in the quarter, a faster pace than the 2.0% gain in the previous quarter.

Residential investment posted a 23.9% annual rate decline, compared with a 20.5% drop in the third quarter. As a result, residential investment was a subtraction of 1.18% from GDP, compared with a 1.08% subtraction in the previous quarter.

Business inventory growth fell $3.4 billion after a $30.6 billion gain in the previous quarter, subtracting 1.25%. Commerce said that motor vehicle inventories were the key factor.

Personal consumption expenditures rose 2.0% in the quarter, a slowdown from the 2.8% gain in the previous quarter. Durables, nondurables, and services PCE all slowed in the quarter.

Nonresidential fixed investment rose 7.5% at annual rate in the fourth quarter, a slowdown from the 9.3% gain in the previous quarter, with both structures and equipment and software growth slower.

The net export gap narrowed further to $521.0 billion in the fourth quarter from $533.1 billion in the third quarter, but the improvement was smaller than in the previous quarter, resulting in a smaller net contribution.

Government spending rose 2.6% compared with a 3.8% rise in the previous quarter.

For the missing December data, Commerce assumed increases in inventories and exports, and a small decrease in imports.

For 2007 as a whole, GDP rose 2.2%, a slowdown from the 2.9% rise in all of 2006. On a fourth quarter over fourth quarter basis, GDP was up 2.5%, compared with a 2.8% year-over-year rise in the third quarter and a 2.6% year-over-year rise in the fourth quarter of 2006.

— Market News International

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