Economy slows to weakest growth in more than five years

Posted at 6:46 a.m. PST Wednesday, Feb. 28, 2001

BY MARCY GORDON, AP Business Writer

WASHINGTON (AP) -- The U.S. economy, hammered by declining exports and spending on durable goods, grew at an annual rate of only 1.1 percent in the final three months of 2000, the weakest performance in more than five years.

The anemic performance of the gross domestic product -- the total output of goods and services produced within the United States -- was only slightly above the expectations of many private economists. They were predicting a growth rate of 1.0 percent.

The weak showing in the fourth quarter, reported Wednesday by the Commerce Department, demonstrated how dramatically the economy had slowed since the second quarter of last year, when it grew at a hectic pace of 5.6 percent.

The fourth-quarter annual growth rate of 1.1 percent was the smallest since 0.8 percent in the second quarter of 1995. It was revised downward from an already-weak 1.4 percent estimated a month ago.

The new report came shortly before Federal Reserve Chairman Alan Greenspan was to deliver the central bank's latest economic outlook to a House committee.

Two weeks ago, Greenspan painted a cautiously optimistic view of the economy's short-term prospects when he delivered his twice-a-year economic outlook report. But he told Congress last month that the economy has likely weakened beyond the fourth quarter's sag, saying growth in the first three months of this year is probably ``very close to zero.''

The Fed chairman did not rule out the threat of a recession, saying the nation's first economic downturn in a decade could occur if consumers stopped spending.

President Bush promoted his big tax-reduction proposal in his State of the Union speech Tuesday night as needed to rev up the sagging economy. And Greenspan has given his blessing to cutting taxes, saying the government's budget surplus projections have grown so large there should be money available both to eliminate the public debt and provide a significant tax cut.

An inflation gauge tied to the gross domestic product rose at an annual rate of 1.9 percent in the fourth quarter, up from 1.8 percent in the third quarter. For all of 2000, this gauge -- which measures the price increases on consumer goods -- was up 2.4 percent, the highest since 1993.

Spending on big-ticket durable goods such as automobiles and other costly manufactured goods expected to last at least three years fell at an annual rate of 2.8 percent in the fourth quarter, compared with a strong 7.6 percent rate of growth in the third quarter.

U.S. exports declined 6.1 percent, compared with a 13.9 percent increase in the third quarter.

-- Swissrose (cellier3@mindspring.com), February 28, 2001