January 31, 2005 11:43 AM
Economy Slowed in 4th Quarter, U.S. Report Says
Excerpt: The Commerce Department, in its initial estimate, said the nation's gross domestic product - its total output of goods and services - rose at an annual rate of 3.1 percent in the fourth quarter of 2004, less than the 3.5 percent that many economists had been expecting. In the third quarter, the economy grew at an annual rate of 4 percent.
The American economy's expansion slowed somewhat in the last three months of the year, the government reported today, as the nation's widening trade gap took a growing toll on growth.
The Commerce Department, in its initial estimate, said the nation's gross domestic product - its total output of goods and services - rose at an annual rate of 3.1 percent in the fourth quarter of 2004, less than the 3.5 percent that many economists had been expecting. In the third quarter, the economy grew at an annual rate of 4 percent.
Anthony Chan, senior economist with JPMorgan Fleming, an asset-management company, said the 3.1 percent growth in fourth quarter showed the economy "moving to a slower growth phase, but one that is more sustainable."
Officials at the Commerce Department said that the biggest factor in the slowdown in the fourth quarter was the record trade deficit. "We had less exports and we had more imports," said Carol Moylan, the chief of the national investment and wealth division of the Bureau of Economic Analysis, which prepared today's report.
Imports jumped by 9 percent in the fourth quarter, an acceleration from an increase of 4.6 percent in the third quarter, while exports fell by 3.9 percent in the fourth quarter, in contrast to a rise of 6 percent in the quarter before.
Mark Zandi, chief economist at Economy.com, a research firm based in West Chester, Pa., said the trade deficit made the difference between a moderate growth and a booming economy, shaving 1.7 percentage points off the fourth-quarter growth rate.
Mr. Zandi said the trade gap reflected "the softening of the global economy at the year's end and our insatiable appetite for Chinese and other Asian imports."
He said the imbalance between what the nation produces and what it consumes was coming to be regarded by most economists as "the most significant threat" to the economy.
Today's report included two figures for the year's overall economic growth, calculated in two different ways. By one measure - averaging the annual growth rates reported for each of the four quarters - the gross domestic product rose by 4.4 percent last year, the biggest increase since 1999. The growth rate calculated in this manner was 3 percent in 2003.
The other method compares the size of the economy now against its size a year earlier. By that measure, which many economists feel gives a more accurate picture of economic trends, the economy grew by only 3.7 percent between the fourth quarter of 2003 and the fourth quarter of 2004 - less than it had grown between the end of 2003 and the end of 2002.
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