U.S. Q4 Economic Growth Revised Up To 1.7%

The U.S. economy expanded at a 1.7% pace in the fourth quarter of 2005, the government said March 30, in a slight upward revision of its previous estimate of 1.6% growth. The Commerce Department's third and final estimate of gross domestic product was in line with expectations.

The report confirmed a sharp deceleration from the 4.1% growth pace in the third quarter, but analysts said the slowdown was linked to Hurricane Katrina and other onetime factors and that growth has picked up in 2006.

The figures from the Commerce Department close the books on 2005, showing growth for the year of 3.5%, compared with 4.2% in 2004 and 2.7 % in 2003.

The report showed corporate profits increased a record $185.8 billion at an annualized rate in the fourth quarter and were growing at the fastest pace in three years. The upward revision to GDP was due largely to higher inventory building by businesses, which offset lower consumer spending on services.

Final sales in the economy -- watched by experts because it shows growth excluding inventory building -- fell 0.2% in the quarter, the weakest performance since the first quarter of 2002. Consumer spending expanded at its weakest pace in 11 years.

Economists say the slump in the quarter was largely the result of temporary factors that have already faded, including the impact of Hurricane Katrina and the end of very generous sales incentives that boosted auto sales in the summer months.

Economists expect that the economy will show growth at a pace of at least 4% in the first quarter, which ends March 31, although that pace is expected to cool later in the year.

Copyright Agence France-Presse, 2006

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