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Last updated at: (Beijing Time) Friday, January 31, 2003

US Economy Grows by Only 0.7% in 4th Quarter ����

The United States economy increased at an annual rate of just 0.7 percent in the fourth quarter as consumers turned cautious in the face of war worries, aplunging stock market and a stagnant job climate.


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The United States economy increased at an annual rate of just 0.7 percent in the fourth quarter as consumers turned cautious in the face of war worries, aplunging stock market and a stagnant job climate.

The Commerce Department reported on Thursday that the small increase in gross domestic product (GDP) in the United States in the last quarter of 2002 followed a strong 4 percent rate gain in the third quarter.

The performance gave the fourth quarter the distinction of being the worst quarter for GDP in 2002. It also marked the weakest showing since the US economy actually shrank at a 0.3 percent rate in the third quarter of 2001 when the country was mired in its first recession in a decade.

The report showed that consumer spending, which accounts for two-thirds of all US economic activity, grew up a rate of just onepercent in the final three months of last year. That was down froma brisk 4.2 percent growth rate in the third quarter and marked the worst showing since the first quarter of 1993.

All of the weakness in consumer spending in the fourth quarter reflected a sharp cut in spending on "durable" goods, big-ticket manufactured products such as cars and electrical appliances. Consumers reduced such spending by a 7.3 percent rate. That was a big turnaround from the strong 22.8 percent rate of increase in the third quarter and marked the largest cutback in spending on durable goods since the first quarter of 1991.

The report also said that, after eight straight quarters of cutting capital spending, US businesses boosted such investment ata 1.5 percent rate in the fourth quarter. That was an improvement over the 0.8 percent rate of decline in the third quarter and marked the best showing since the third quarter of 2000.

However, all of the strength came from spending on equipment and software. Companies in the United States continued to cut investment in new plants and buildings.

Businesses, however, added less to their stockpiles of unsold goods in the fourth quarter, resulting in a 0.6 percentage-point reduction to GDP. The bloated trade deficit also was a drag on fourth-quarter economic growth.

The report also showed that an inflation gauge tied to the GDP rose at a 1.9 percent rate in the fourth quarter, up a little fromthe 1.7 percent rate in the third quarter as oil prices rose amid war worries. Still, the latest reading suggests inflation is undercontrol.


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