by Calculated Risk on 2/28/2007 09:46:00 AM

From MarketWatch: Fourth-quarter GDP revised down to 2.2%

The U.S. economy has now grown at a rate of less than 3% for three quarters in a row, government data show, after a significant downward revision to fourth-quarter estimates.

The economy grew at a real annual rate of 2.2% in the three months of 2006, not at the 3.5% rate reported last month, the Commerce Department said Wednesday.

While consumer spending remained healthy, slower investments in homes, businesses and inventories were a major drag on growth in the quarter.

Gross private domestic investment was revised downwards significantly, even though residential investment (RI) was essentially unchanged. RI was revised slightly from -19.2% (SAAR) to -19.1% for Q4.

Perhaps ominously, nonresidential investment was revised downwards from -0.4% to -2.4%. Investment in equipment and software was revised downwards from -1.8% to -3.2%. And nonresidential structures (a key category) was revised downwards from 2.8% to -0.8%.

As mentioned yesterday, nonresidential investment typically trails residential investment by three to five quarters. So a nonresidential investment slump, starting about now, is expected based on historical investment patterns (See Investment Lags for an analysis of the lag times, as compared to residential investment, for equipment and software, and non-residential structures).