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GDP growth revised down
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February 28, 2001: 12:39 p.m. ET
Revised 4Q expansion rate was 1.1%, slowest in 5-1/2 years
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NEW YORK (CNNfn) - The U.S. economy grew more slowly in the fourth quarter than initially estimated, showing the slowest expansion rate in 5-1/2 years, the government reported Wednesday.
Gross domestic product, the broadest measure of the world's biggest economy, grew at a 1.1 percent annual rate in the quarter, a bit slower than the 1.4 percent rate estimated a month ago, the Commerce Department said.
The revised number, which was in line with forecasts on Wall Street, came ahead of widely awaited testimony from Federal Reserve Chairman Alan Greenspan. He told a House panel that, even after two interest rate cuts last month, the economy still is at risk of a below-par performance -- a signal more rate cuts may be coming.
 U.S. stocks fell as investors listened to Greenspan and sensed he did not feel the urgency to cut interest rates ahead of the Fed's March meeting.
The revised GDP figure was half of the 2.2 percent rate recorded in the third quarter and was the slowest quarterly growth pace since a 0.8 percent gain in the second quarter of 1995, when the economy was coping with overstocked inventories.
Private businesses increased inventories $59.5 billion in the quarter, following an increase of $72.5 billion in the third quarter and $78.6 billion in the second.
David Orr, chief economist at First Union Securities, said in a note Wednseday he believes inventory accumulation must slow to $20 billion before manufacturers see a rebound in new orders, which likely would not happen before the end of the first half of 2001.
A question of timing
Just hours after the government's initial fourth-quarter GDP report Jan. 31, the Fed cheered Wall Street with the announcement it would cut interest rates at its regularly scheduled meeting. That followed a surprise rate cut Jan. 3.
Reports of sluggish growth and weak corporate earnings in recent weeks have fueled speculation that the Fed may again take the unusual step of cutting rates in between meetings. The central bank's policy makers' next regular meeting is set for March 20.
"He [Greenspan] is going to say we're not in a recession, but the risks are very, very high," James Annable, chief economist at WingspanBank.com told CNNfn's "Before Hours" Wednesday. "The conclusion from that, which is important, is that they're going to be aggressive. They're going to be cutting rates."
"I think the Fed will act aggressively. The timing remains to be seen, but both Main Street and Wall Street are pleading for further rate cuts, so I think Greenspan will respond," Oscar Gonzalez, an economist with John Hancock Financial Services Inc., said in a research note. "The sooner and deeper a rate cut, the sooner consumer and business confidence should improve."
The economic slowdown has resulted in thousands of lost jobs across the United States. Economists have begun to fear that a decade-long economic expansion -- the longest in U.S. history -- may be in danger of ending.
Greenspan painted a cautiously optimistic view of the economy when he told lawmakers last month that economic growth in the first three months of this year is probably "very close to zero."
Since then, reports have pointed to further drops in consumer confidence and the housing market. Consumer confidence is closely watched since consumer spending fuels two-thirds of the economy.
In its report, the department said that a key inflation gauge rose at a 1.9 percent rate in the fourth quarter, up from 1.8 percent in the third quarter. For all of 2000, the implicit price deflator measuring price increases on consumer goods was up 2.4 percent, the biggest increase since 1993.
Spending on big-ticket durable goods -- such as automobiles, refrigerators and dishwashers -- fell at an annual rate of 2.8 percent in the fourth quarter, compared with 7.6 percent growth rate in the previous quarter.
Exports fell 6.1 percent in the quarter, down sharply from the 13.9 percent rise the prior quarter.
-- from staff and wire reports 
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