Economy Sputters in Fourth Quarter

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Jan. 27, 2006--The U.S. economy slowed considerably at the end of 2005, dropping to its weakest pace in three years, the Commerce Department reported Friday.

Throughout the downturn, many businesses kept busy restocking inventories ahead of an expected surge in demand over the next few months, the report showed.

Real gross domestic product -- the output of all goods and services across the country -- grew at an annual rate of just 1.1% over the fourth quarter of 2005, compared to 4.1% over the previous quarter, according to the department's advance estimates.

The slowdown, which broke a 10-quarter streak of growth over 3%, was blamed on declines in consumer, business, and federal government spending, alongside a sharp rise in imports -- jumping a full 9.1%, compared to just 2.4% over the third quarter.

On the plus side, inventory investment and exports picked up over the fourth quarter, while prices paid for domestic goods gained just 3.3%, after rising 4.2% previously.