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.
The economic slowdown has brought thousands of job layoffs
across a number of industries. Economists have begun to fear that
the nation's decade-long economic expansion, the most prolonged in
history, may be in danger of ending.
On Wall Street, investors have been hoping that the Federal
Reserve might be preparing another surprise cut in interest rates,
like the one on Jan. 3.
Even with the dramatic slowdown in the latter part of last year,
however, the economy grew by 5.0 percent in 2000, the best showing
since a 7.3 percent rise in 1984. That capped a remarkable
four-year period in which growth every year was above 4 percent,
the best performance since the mid-1960s.
In the fourth quarter, business investment on new plants and
equipment — a major force behind the economic expansion — slipped
0.6 percent, compared with a surge of 7.7 percent in the third
quarter.
