US economic growth slowed dramatically to a 0.6% annual pace in the fourth quarter of 2007 amid a worsening housing slump and a related credit squeeze, the government said today.
Most economists had only expected gross domestic product (GDP) growth to slow to around 1.2% during the last three months of 2007.
Growth moderated abruptly from a 4.9% annualised pace in the third quarter, decelerating to its weakest rate since the end of 2002.
The much weaker-than-expected reading for fourth quarter growth comes amid growing fears that the world's largest economy could be slipping into a recession.
The weakened growth snapshot was also released hours before the Federal Reserve was widely expected to announce another cut in US interest rates in a bid to underpin economic momentum.
The Commerce Department's initial reading of fourth quarter growth, which is subject to revision, showed that the housing slump acted as a major drag on growth.
The government survey showed that real residential fixed investment, or new home construction, plummeted 23.9%, marking its biggest decrease since 1981.
The economy is weathering a two-year long housing slump with a glut of unsold homes weighing on the property market. Home prices in many states have also weakened in the past year.
Despite the slowdown in growth, inflation pressures continued to percolate, particularly as energy costs remain relatively high.
A key inflation guage in the report showed personal consumption expenditures rose 3.9% in the fourth quarter following a tamer 1.8% increase in the previous quarter.
