WASHINGTON – Economic growth slowed to a 2 percent pace in the late summer, more sluggish than previously thought, as the real-estate bust weighed on overall business activity.
The economy has been losing momentum all this year. The main culprit behind the third quarter's slowdown was the deepening housing slump.
Investment in home building was slashed at a 18.7 percent rate -- even more than previously estimated -- and the largest cut in 15 years. That shaved 1.2 percentage points off third-quarter growth, the most in nearly 25 years.
Economists were expecting the goverment's old GDP estimate of 2.2 percent growth for the third quarter to hold.
GDP measures the value of all goods and services produced within the United States and is the best barometer of the country's economic health.
The new GDP figure underscores just how much speed the economy has lost this year as the crumbling housing market, the toll of the Federal Reserve's two-year credit tightening campaign and once-surging energy prices have crimped economic activity.
In the first three months of this year, the economy grew at a hot 5.6 percent pace, the strongest spurt in 2 1/2 years. However, in the second quarter, growth slowed to a 2.6 percent pace as galloping energy prices and the impact of higher borrowing costs turned consumers and businesses cautious.
Many economists believe the economy stayed lethargic in the current October-to-December period. Forecasts range from a pace of around 1.7 percent to 2.5 percent.
Even with expectations that economic activity will continue to be subpar in the months ahead, most analysts don't expect the economy to fall into recesssion.
Republicans and Democrats have differing views on the extent to which Americans have benefited from the economic expansion over the last five years.
A top priority for the Democrat-controlled Congress, which convenes in January, will be raising the federal minimum wage from $5.15 an hour to $7.25 an hour. It hasn't gone up in nearly 10 years.
Americans' gave President Bush lower marks for his economic stewardship. The president's approval rating on the economy sank to 38 percent in December, down from 43 percent in November, according to an AP-Ipsos poll.