January 28, 2005 9:00 AM, EST

GDP Grew at 3.1% for Fourth Quarter, Commerce Says

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he U.S. economy grew at an annual rate of 3.1% in the fourth quarter, down from 4% in the third quarter, the Commerce Department said Friday.

The gross domestic product growth rate was smaller than expected and was affected by a record trade deficit, Bloomberg News reported. GDP is the value of all the goods and services produced in the country.

The trade deficit grew to $609.3 billion last year, its highest level ever, and reduced fourth-quarter growth by 1.7%, Bloomberg said.

For all of last year, the U.S. GDP rose 4.4%, the most since 1999, compared with 3% in 2003.

The deceleration in GDP growth primarily reflected fewer exports, more imports and less consumer spending that were partly offset by an upturn in private inventory investment, Commerce said.

Economists had forecast a 3.5% GDP gain for the fourth quarter, Bloomberg said.

Consumer spending, which accounts for about two-thirds of GDP, rose 4.6% for the quarter and 3.8% for 2004. GDP for all of 2003 was 3.3%, Bloomberg said.

The trade deficit, which swelled to its widest ever in November, subtracted 1.7 percentage points from fourth-quarter growth. That was the largest cut from GDP since mid-1998.

Commerce also said that business fixed investment rose 10% for the quarter, compared with a 13% rate in the third quarter. Companies raised their inventories at a $45.8 billion annual rate, compared with $34.5 billion the previous quarter.