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Last Updated: Thursday, 28 February 2008, 14:21 GMT
GDP data confirms weak US growth
Repossessed house
The housing slump has weighed on US growth
US economic growth fell sharply in the last three months of 2007 as the credit crunch took effect and spending on new housing slumped, revised figures show.

Updated figures from the US Department of Commerce showed the economy grew at an annual rate of just 0.6% in the quarter, as predicted last month.

The data follows a quarter of brisk growth, as between July and September the US grew at an annual pace of 4.9%.

GDP grew by 2.2% for all of 2007, the slowest rate since 2002.

Investment in real estate fell at an annualised pace of 25.2% in the fourth quarter, the biggest fall since 1981.

Rate cut ahead?

Cary Leahey, economist and managing director of Decision Economics in New York, said: "The good news was that GDP was not downwardly revised closer to zero in the fourth quarter, but it does suggest that growth was very slow in the last quarter of 2007 and is likely to be slow this quarter."

The figures come a day after US Federal Reserve chief Ben Bernanke hinted the central bank was prepared to cut interest rates further to help ease recession fears.

In his semi-annual report to the US Congress, Mr Bernanke said the Fed would continue to "act in a timely manner as needed to support growth".

Analysts said his comments increased the likelihood of another rate cut at the Fed's next meeting on 18 March.

US interest rates are currently at 3% after two major reductions in January.

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