U.S. Economy Grows 0.2 Percent in Fourth Quarter

The small increase in the real gross domestic product (GDP), the total output of goods and services produced in the country, was unexpected. Economists were projecting the economy would decline by around 1 percent in the fourth quarter.

For the whole year of 2001, the economy grew 1. 1 percent, a sharp deceleration from the 4.1 percent increase in 2000. It was the weakest showing since the economy actually contracted by 0. 5 percent for all of 1991, the year the last recession ended.

The U.S. economy slid into recession last March and was dealt another blow by the September 11 terror attacks. A total of 1.4 million Americans have lost their jobs since March.

The increase in real GDP in the fourth quarter reflected positive contributions from personal consumer spending and from government spending that were mostly offset by negative contributions from private inventory investment, from business investment, from exports, and from residential investment, the government said.

Consumer spending increased at an annual rate of 5.4 percent in the fourth quarter, compared with a 1 percent increase in the third quarter. Most of the strength came from the spending on motor vehicles, reflecting a burst of auto sales in the final three months of the year as consumers took advantage of free financing offers.

The government spending rose 9.2 percent in the fourth quarter,up from a 0.3 percent increase in the third quarter. It was the biggest quarterly increase since the third quarter of 1986 and reflected a big rise in federal spending on the war in Afghanistan and to boost security at home.

The biggest negative factor in the fourth quarter was a record drop of 120.6 billion U.S. dollars at an annual rate in business inventories as firms continued a frantic effort to work off unsold goods.

Business investment in new plants and equipment fell at a rate of 12.8 percent in the fourth quarter, compared with a decrease of 8.5 percent in the previous quarter. Business investment has declined for four quarters in a row.

The trade deficit subtracted 0.85 percentage point from the overall GDP total in the fourth quarter, compared to a reduction of 0.27 percentage point in the third quarter.

Inflation, as measured by the personal consumption expenditures,rose at an annual rate of 0.8 percent in the fourth quarter, after declining 0.2 percent in the third quarter. For the year, the index rose by 1.9 percent, a better showing than the 2.7 percent increase in 2000.

The Federal Reserve, which cut interest rates 11 times last year in an effort to revive the economy, began a two-day meeting Tuesday and most analysts expected it would decide against cutting interest rates again, believing that the rate cuts they engineered last year will be enough to guarantee a sustainable rebound.

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Xinhua News Agency