Washington, DC, Jan. 30--The U.S. economy slowed in the final quarter of 2002, growing at an annual rate of just 0.7%. The small rise in gross domestic product came after the economy grew at a 4% rate in the third quarter, according to the Commerce Department.
GDP measures the total value of goods and services produced within the U.S. and is considered the broadest barometer of the economy's health.
The performance, weaker than the 0.9% increase analysts were predicting, gave the fourth quarter the distinction of being the worst quarter for GDP in 2002. It also marked the weakest showing since the economy actually shrank at a 0.3% rate in the third quarter of 2001 as the country was mired in its first recession in a decade.
Although the economy ended the year on a sour note, it grew by a decent 2.4% overall. While that marked a big improvement over the tiny 0.3% rise registered in 2001, it was still considered weaker than normal growth for the U.S. economy.
The economy, knocked down by a recession that began in March 2001, has been struggling to get back on firm ground. Economic growth has been uneven, with a quarter of strength, followed by a quarter of weakness. That has presented challenges for President Bush, who wants to get the economy back to full throttle and doesn't want economic woes to linger as he gets ready for his 2004 re-election bid.
To help spark economic growth, Bush has offered a ten year, $674 billion tax cut proposal. The Federal Reserve will hold a key interest rate at a 41 year low of 1.25%, with the hope that will spur consumers and businesses to spend and invest more, bolstering economic growth. The Fed has cut interest rates 12 times in the past two years in a bid to energize the listless economy.
Consumers have been virtually the sole source of support keeping the economy going.
But in the fourth quarter of 2002, they grew tired. Consumer spending grew up a rate of just 1% in the final quarter of the year. That was down from a 4.2% 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 appliances. Consumers reduced such spending by 7.3%. That was a big turnaround from the 22.8% rate of increase in the third quarter and marked the largest cutback in spending on durable goods since the first quarter of 1991.
