U.S. economic growth slowed sharply in the fourth quarter to the weakest pace in three years as consumers spent less robustly, growth in home building eased and businesses were less eager to boost investments, a government report on Friday showed.

Gross domestic product, the broadest measure of economic activity within U.S. borders, advanced at a surprisingly weak 1.1 percent annual rate in the October-December period — little more than a quarter of the third quarter's 4.1 percent rate and the weakest for any three months since 0.2 percent in the fourth quarter of 2002.

The softer-than-anticipated data shocked financial markets, prompting a decline in the dollar's value and a jump in bond prices as investors prepared to shift assets from stocks into debt securities.

Fourth-quarter growth was far weaker than the 2.8 percent rate that Wall Street economists had forecast and reflected widespread softness.

Consumer spending, which fuels two-thirds of national economic activity, slowed to a 1.1 percent rate of growth, sharply below the third-quarter rate and the weakest since a 1 percent gain in second quarter of 2001. Spending on costly durable goods, which include cars and other items intended to last three years or more, plunged at a 17.5 percent rate.

That was the steepest drop in durables spending in nearly 19 years, since a 23.2 percent fall in the first quarter of 1987.

Analysts said the GDP report partly reflected the impact of Hurricane Katrina, which caused widespread disruption in the Gulf Coast region in late summer and fall.

"Taking it at face value, the hurricane played a big role in contributing to the weakness," said economist Richard DeKaser of National City Corp. in Cleveland. "Consumer spending was abysmal in October and November. It's an extremely weak report overall."

But some other analysts noted some of the negative influences — like the hurricane impact — could be temporary.

"Some of the recent data we have been getting is decidedly more upbeat," said Robert Sinche, a global currency strategist with Bank of America in New York. "The market looks at this as interesting history, likely to be revised up in future months."

In 2005, GDP expanded by 3.5 percent, slowing from 4.2 percent growth in 2004.

There also were signs of increased pressure on prices in the fourth quarter. The price index for consumer spending rose at a 2.6 percent rate in the fourth compared with the third quarter's 3.7 percent. However, the core PCE index, which strips out volatile food and energy costs, picked up to a 2.2 percent rate of increase from 1.4 percent in the third quarter.

The Federal Reserve's policy-setting Federal Open Market Committee is set to meet on Tuesday, and has indicated it is closely watching inflation. The Fed has raised short-term interest rates 13 times since mid-2004 and is widely expected to boost them again on Tuesday.

Economist William Sullivan of JVB Financial Group in New York said the soft GDP data might raise speculation that the Fed is near an end to its rate-rise cycle.

"These data might introduce a bigger element of doubt as to whether you will get another Fed rate hike in March," Sullivan said. "But right now there's a sense that this is a soft patch and that there is probably a reacceleration under way."

Business investment grew at a 2.8 percent annual rate in the fourth quarter, less than half the third quarter's 8.5 percent rate and the weakest for any quarter since a 1.1 percent drop in the first quarter of 2003. Inventories climbed at a $25.7 billion rate during the final three months of last year, a sharp change following decreases at a $13.3 billion rate in the third quarter and $1.7 billion in the second quarter.

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