Economy expected to pick up after slowing down

Analysts aren't too concerned about the slow fourth quarter.
WASHINGTON (AP) -- The economy slowed to a near crawl in the final quarter of 2005, a listless showing that was the worst in three years. However, growth was respectable for the year and is expected to perk up again soon.
Gross domestic product clocked in at an annual rate of just 1.1 percent from October through December. That marked a loss of speed compared with the third quarter's brisk 4.1 percent pace, the Commerce Department reported Friday.
Belt tightening by consumers, businesses and the government figured into the fourth-quarter's slowdown.
GDP, which measures the value of all goods and services produced within the United States, is the best barometer of the economy's fitness.
Even with the feeble finish, the economy logged growth of 3.5 percent for all of 2005 -- a year when the country coped with fallout from lofty energy prices and the devastating Gulf Coast hurricanes. Analysts called the GDP figure for all of 2005 solid, although it was down from 2004's 4.2 percent gain.
"Considering the impact of the hurricanes and record heating bills last year, the economy continues to show remarkable resilience," said Bill Cheney, chief economist at John Hancock Financial Services.
Just a setback
Looking at the fourth quarter, economists felt the slowdown was more of a temporary setback rather than a harbinger of a sustained period of economic troubles ahead.
"The economy hit a pothole in the fourth quarter. I'm not at all worried about the health of the economy," said Mark Zandi, chief economist at Moody's Economy.com.
Zandi believes the economy in the current January-to-March quarter is already doing better and predicts growth will come in around a 4 percent pace. For all of 2006, analysts project economic growth to top 3 percent.
On Wall Street, stocks surged on a fresh round of strong earnings reports. The Dow Jones industrials gained 97.74 points to close at 10,907.21.
President Bush, in his State of the Union address Tuesday evening, plans to spotlight some pocketbook issues, including high energy prices, tax cuts and expensive health care. Public concern about the economy is still relatively high, polls indicate.
Taking advantage
The GDP report gave both Republicans and Democrats something to seize upon.
"We know the economy is not in real good shape. We have the price of oil, which is volatile, going up and down, up and down. We know that the deficit is staggering," said Senate Minority Leader Harry Reid, D-Nev.
Treasury Secretary John Snow countered that the "economic fundamentals point to continued strong economic performance in the United States in 2006." He called the fourth-quarter's weak showing "somewhat anomalous" and said he wouldn't read too much into it.
Consumers turned cautious in the final quarter as high energy prices and rising borrowing costs took a toll on their budgets. Their spending grew at a 1.1 percent pace, the slowest since the second quarter of 2001 when the economy was suffering through a recession.
Most of the weakness came as people sharply cut back on purchases of big-ticket "durable" goods, such as cars. This spending dropped by a hefty 17.5 percent rate, the sharpest decline since the first quarter of 1987.
Businesses also were more restrained, boosting spending on equipment and software at a 3.5 percent rate in the fourth quarter, the smallest since the first quarter of 2003.
Another factor restraining overall GDP in the fourth quarter: federal government spending, which fell at a 7 percent rate, the biggest drop since the third quarter of 2000. Analysts, skeptical about this decline, believed it would be reversed, especially given spending related planned for the war in Iraq and hurricane cleanup and rebuilding.
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