By DPA
Washington : US economic growth slumped in the fourth quarter to 0.6 percent as home construction and vehicle output plunged and consumer spending cooled, US officials said Wednesday.
In comparison growth in the third quarter was a robust 4.9 percent, US commerce officials said, and the fourth quarter figure pulled down annual growth for 2007 to about 2.2 per cent, the lowest in five years.
Economists had been bracing for the drop as the US subprime credit crisis continues to wreak worldwide havoc in the financial and banking sectors, but the figure was only half of what they had expected.
Later Wednesday, the US Federal Reserve is to rule on new interest rates, and economists are predicting it could lower the rate again by as much as a half point after an emergency reduction of three-quarters of a point to 3.5 per cent last week.
On Tuesday, the US House of Representatives approved an emergency economic stimulus package that includes more than $146 billion (99 billion euros) in tax relief designed to encourage spending and investment. The Senate must still act on the measure.
The 24-percent plunge in home construction last quarter, the biggest since the last three months of 1981, subtracted 1.2 percentage points from growth. A drop in car production subtracted another 0.9 percentage points compared to the third quarter, the commerce department said.
Consumer spending, which accounts for more than two-thirds of the economy, grew at only two percent from October to December. Computer sales added 0.18 percentage points to the growth figure.
Exports only grew 3.9 per cent in the fourth quarter compared to the booming 19.1-percent jump in the third.
Imports grew by 0.3 per cent, down from the 4.4-percent growth in the previous period. The cool-down in consumer spending combined with the drop in imports are directly blamed on the US mortgage crisis and falling home values that have eroded personal bank accounts.
With the US accounting for 21 per cent of the global economy, the Washington-based International Monetary Fund on Tuesday reduced its expectations for 2008 world economic growth to 4.1 percent, down from the original forecast of 4.8-per-cent growth, citing the negative effect of the US mortgage and financial crisis.
The IMF has predicted US economic growth will slow to 1.5 percent this year.
The possibility of a US recession dominates economic discussions in the US, and was at the top of the agenda last week at the World Economic Forum in Davos, Switzerland.
The Commerce Department will release a series of revised figures for the fourth quarter starting on Feb 28.