Final GDP Reading Stands at 0.6 percent for Fourth Quarter

Economic growth in the United States bottomed-out in the fourth quarter of 2007 with the gross domestic product growing at a 0.6 percent annual rate, according to the final reading from the Department of Commerce Thursday. 

Economists and analysts had predicted that Commerce would not change its previously-reported figure of 0.6 percent. Commerce releases preliminary numbers for GDP growth the month after every quarter, and then supplies two updated revisions of the number once all the data is compiled. This is the last update for Q4 2007.

Before the preliminary numbers were released in January, most had predicted a consensus growth rate of 1.1 – 1.2 percent in the fourth quarter after healthy growth of 4.9 percent in the third quarter of 2007. The 0.6 percent growth was the lowest in a quarter since 2002, when the economy was pulling out of a mild recession.

For the entire year, the economy expanded 2.2 percent, the lowest yearly rate since 2002’s 1.6 percent. GDP grew at 2.9 percent in 2006. Total GDP in the U.S. was $13.84 trillion at the end of 2007.

Consumer spending was the largest factor in positive GDP growth, adding 1.4 percentage points to growth. Business investment added 0.8 points while government spending added 0.5 points.

The main drags on the economy in the fourth quarter were a large reduction in inventories and a plunge in housing investment. Inventories were reduced by $3.4 billion in the quarter, taking 1.3 points off of GDP growth. Housing investment plummeted by the largest margin since 1982, taking 1.2 points from GDP growth.

All eyes now turn to GDP growth for the first quarter of 2008, which ends Monday. Numbers for the quarter will be released by Commerce in late April. Most economists are expecting growth of around 0 percent, with the GDP growth potentially moving into negative territory in the second quarter.