Economy skids to near halt in final quarter of 2007

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The Associated Press

WASHINGTON – The economy skidded to a near halt in the final quarter of last year, clobbered by dual slumps in housing and credit that caused people and businesses to spend and invest more sparingly.

The Commerce Department reported today that the gross domestic product increased at a scant 0.6 percent pace in the October-to-December quarter. The reading – unchanged from an initial estimate a month ago – underscored just how much momentum the economy has lost.

In the prior quarter, the economy clocked in at a brisk 4.9 percent pace. Gross domestic product measures the value of all goods and services produced in the United States and is the best barometer of the country’s economic health.

“The economy just kept its head above water,” said Nigel Gault, economist at Global Insight. Economists had thought the newly released fourth-quarter GDP would have been bumped up to a 0.8 percent growth rate.

The housing picture looked even more bleak in the new report. Builders slashed spending on housing projects by a whopping 25.2 percent on an annualized basis in the fourth quarter, the biggest cut in 26 years. And, even though economic growth slowed, inflation picked up – an ominous mix that could spell further trouble for the economy.

As if the newly confirmed fourth-quarter GDP figure of 0.6 percent wasn’t chilling enough, the Labor Department reported Thursday that new applications for unemployment insurance benefits rose by 19,000 to 373,000 last week, more evidence that the general economic sluggishness is spilling over into the job market.

On Wall Street, the latest batch of economic news rattled investors. The Dow Jones industrials were down in morning trading.