Economy slows up in quarter

WASHINGTON — The economy turned in a much weaker performance in the final quarter of 2006 than initially thought, and new-home sales tumbled in January by the most in 13 years, suggesting more business lethargy ahead.

The latest batch of economic reports from the Commerce Department on Wednesday pointed to a temporary economic listlessness rather than signaling the economy would slip into recession, economists said.

Ken Mayland, president of ClearView Economics, called it a "midcourse breather."

The new reading on gross domestic product showed the economy grew at a 2.2 percent pace — a considerably weaker rate than the government first estimated. It initially had reported the expansion in the last three months of 2006 to be at a 3.5 percent pace. The principal reason for the new, significantly lower estimate: Businesses tightened their belts amid fallout from the troubled housing and automotive sectors.

The fresh look at the housing market was sobering. New-home sales plummeted by 16.6 percent in January from the previous month. That was the largest decline since January 1994, when sales slid by 23.8 percent.

The decline in January — much steeper than analysts anticipated — left sales at a seasonally adjusted annual rate of 937,000, the lowest level since February 2003.

As sales cooled, so did home prices.

The median sales price of a new home — where half sell for more and half for less — dropped to $239,800 in January, down 2.1 percent from the same month last year.

The new GDP figure for the October-to-December quarter was a tad slower than the 2.3 percent growth rate economists were forecasting and clearly less sunny than the original estimate. The GDP, which measures the value of all goods and services produced within the United States, is the best overall barometer of economic health.

Although the fourth quarter's showing marked a slight improvement from the third quarter's mediocre 2 percent growth rate, it didn't alter the overall picture that economic activity in both quarters was restrained by the housing slump and the ailing automotive sector.

Investment in home building in the fourth quarter was slashed by 19.1 percent on an annualized basis, the steepest decline in 15 years.