Washington — The economy registered its weakest growth in more than five years during the last three months of 2000, and a few analysts believe it may have stopped growing or even slipped slightly into reverse in the current quarter. Corporate profits, meanwhile, fell for the first time since 1998.
Against this backdrop, economists said the Federal Reserve, which has slashed rates three times since January by a total of 1.5 percentage points, would need to cut rates several times more to keep the foundering economy afloat.
The broadest measure of economic health the gross domestic product grew at an annual rate of just 1 percent in the October-December quarter, the Commerce Department reported Thursday. A drop in spending on big-ticket items by businesses and consumers accounted for most of the weakness.
It was the worst showing since a 0.8 percent growth rate in the second quarter of 1995.
The government's final reading on fourth-quarter GDP the total output of goods and services produced in the United States showed the economy expanded more slowly than the 1.1 percent and 1.4 percent rates previously thought.
Fed Chairman Alan Greenspan has estimated that growth at the beginning of this year was probably "very close to zero."
Some analysts believe output actually shrank in the first quarter. Paul Kasriel, chief economist at the Northern Trust Co., who is in that camp, estimates GDP declined by 0.3 percent in the current January-March quarter.
But other economists say the economy in the first quarter either is growing at a slow pace of about 0.8 percent or about the same pace posted in the fourth quarter.
"There's no doubt that we have very, very minimal growth and conditions are soft at this point," said economist Joel Naroff, president of Naroff Economic Advisors.
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