U.S. 4Q Growth Weakest in Over Five Years

New figures from the U.S. Commerce Department Wednesday confirm that trucking firms and factory operators knew what they were talking about when they warned that the economy was slowing fast toward the end of the year.

Commerce said gross domestic product grew at just a 1.4% annual pace in the fourth quarter, the weakest since a 0.8% growth rate in the second quarter of 1995. And the sluggish year-end period follows an already slow 2.2% growth rate for last year’s third quarter.

This initial government estimate of 1.4% growth for October through December was weaker than analysts had projected, and bolsters the case for the Federal Reserve to keep cutting interest rates aggressively. The Fed cut rates half a point on Jan. 3, and is expected to announce another half-point cut Wednesday afternoon.

Fed Chairman Alan Greenspan last week told Congress that economic growth right now is probably near zero, so whatever cutting the Fed does this week is likely to be followed by more in coming months.

Just in last year’s April-June quarter, GDP grew at an annual 5.6% rate, and the Fed was aggressively hiking interest rates to slow it down. That monetary tightening, plus hard-hitting price increases for fuel last year, eventually took hold and caused the economy to slow dramatically.

But even with a sharp slowdown in the second half, last year saw economic growth of 5%, Commerce reported, which was the strongest yearly pace since 7.3% in 1984.