Economy turns in ‘weaker performance’ in 2006

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 yesterday 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 reports came a day after stocks at home and abroad took a nosedive as investors worried about the economic health of global powerhouses, the United States and China.

Wall Street rebounded yesterday as Federal Reserve Chairman Ben Bernanke sought to calm investors’ nerves and allay fears about a major economic slowdown. Bernanke said the Fed was looking for “moderate growth in the U.S. economy going forward.”

The Dow Jones industrials, which had been up more than 130 points earlier in the day, finished the session with a gain of 52.39 points to 12,268.63.

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 automative sectors.

Bernanke said he wasn’t worried about the GDP’s downward revision, saying the new reading “is actually more consistent with our overall view of the economy than were the original numbers.”