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To: AllansAlias who wrote (63400)	1/31/2001 8:34:43 AM
From: UnBelievable	Read Replies (1) \| Respond to of 436258

Business Investment Fall Tempers Q4 US GDP =========================================================== Gross Domestic Product 4th 3Q 2Q Surprise: Yes ! Overall GDP Growth 1.4% 2.2% 5.6% !Trend:More ! PCE Price Index 2.2% 1.8% 2.1% ! Weakness ! !Survey: 1.9% ! =========================================================== By Jennifer Corbett Dooren Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--The U.S. economy slowed to its slowest pace in more than four years during the last quarter of 2000 as business investment fell for the first time since 1991. Fourth quarter Gross Domestic Product, a measure of all goods and services produced in the U.S., rose at a 1.4% pace, the smallest increase since GDP rose 0.8% in the second quarter of 1995, the Commerce Department reported Wednesday. Over the year, however, the economy grew at a 5.0% pace, the best performance since the 7.3% pace recorded in 1984. On a year-over-year basis, the U.S. economy grew at a 4.2% pace in 1999. Despite the strong economic performance for all of 2000, economic growth slowed significantly the second half of the year. After recording a 4.8% and a 5.6% pace in the first and second quarters, respectively, growth slowed to 2.2% during the third quarter before registering the 1.4% pace in the fourth quarter. Fourth quarter's grow was slower than analysts were expecting. A Dow Jones Newswires-CNBC survey of 17 economists forecast economic growth in the fourth quarter to be 1.9%. But the report is expected to have little impact on policymakers at the Federal Reserve who are in the middle of a two-day meeting to determine interest-rate policy. The Fed is widely expected to lower the federal funds rate later Wednesday from its current level of 6%. Most economists are predicting at least a half-percentage point cut. The fourth quarter GDP report shows that businesses sharply reigned in their spending. Business investment fell 1.5% the fourth quarter, the worst performance since a 2.0% drop recorded in the fourth quarter of 1991. Business investment in equipment and software fell 4.7% during the quarter, which is also the first drop since the last economic recession. The last time business capital spending fell was in the first quarter of 1991 when it dropped by 10.3%. The only bright spot was a 9.3% gain in business investment in structures. Businesses also slowed their accumulation of inventories during the quarter. Businesses inventories grew by $67.1 billion after growing by $72.5 billion in the third quarter. The change in private inventories subtracted 0.18 percentage points from fourth quarter GDP. Real final sales, which is GDP less the change in private inventories, rose 1.6% during the quarter, down from the 2.4% increase recorded in the third quarter. Consumers also slowed their spending a bit in the fourth quarter, but they still helped prop-up the overall GDP figure as consumer spending accounts for two-thirds of economic growth. Personal consumption expenditures rose 2.9% in the fourth quarter, compared to the 4.5% pace in the third quarter and a 3.1% rate in the second quarter. Spending on big-ticket durable goods like automobiles fell 3.4% in the quarter while spending on nondurable goods items ticked up 0.8%. Spending on services rose 5.3% in the fourth quarter after rising 3.7% in the third quarter. Federal Reserve Board Chairman Alan Greenspan, along with other analysts, believe the U.S. economy has only continued to slow as it entered the first quarter of this year. In congressional testimony last week the Fed chief noted the "very dramatic slowing down" of the economy and said economic growth during the current quarter is "probably very close to zero." He suggested that consumers were the key to whether the U.S. economy went from a mere slowdown to a recession, saying it depended whether the "marked decline breaches consumer confidence." Based on the most recent consumer confidence reports it is likely that consumer spending will slow even further in the first quarter, which could translate into a negative GDP growth rate. Earlier this week, a report showed that consumer confidence fell in January to its lowest level in four years. Fourth quarter's GDP report showed that inflation continues to remain in check. The chain-weighted price index for gross domestic purchases was 1.9% in the fourth quarter, down from 2.0% in the third quarter. The price index for personal consumption, a measure watched closely by the Federal Reserve, rose at a 2.2% pace during the fourth quarter after rising 1.8% in the third quarter.