U.S. Economy Expanded 0.6 Percent in Q4


The U.S. economy weakened more than forecast in the fourth quarter as housing sank deeper into recession and consumer spending cooled.

Economic growth slowed to an annual rate of 0.6 percent in October through December, half the rate forecast, following a 4.9 percent pace the previous three months, the Commerce Department said today in Washington. Residential construction dropped by the most in 26 years.

Housing slumped as subprime lending collapsed and financial markets seized up, putting the six-year expansion at risk. The Federal Reserve will likely cut interest rates today for the second time in nine days to shore up business confidence and try to prevent consumer spending from slowing even more.

Companies in the U.S. added 130,000 workers in January, a private report based on payroll data showed today. The increase in the ADP Employer Services gauge was bigger than economists had forecast, while following a gain of 37,000 in December that was less than half the average monthly increase of the past five years.

The Fed may lower the benchmark interest rate by a half point to 3 percent today to ward off a broader downturn, according to economists surveyed. Central bankers cut the rate by three-quarters of a percentage point on Jan. 22, the largest reduction in the two decades that it has been the principal tool of policy makers.


TradingEconomics.com, Bloomberg
1/30/2008 6:32:38 AM