Existing-Home Sales Decline 2.8% in January

The U.S. economy grew at an upwardly revised but still-weak 1.6% annual rate in the fourth quarter, while sales of existing homes tumbled in January and consumer confidence fell slightly in February, according to economic reports released Tuesday.

Economists said the reports didn’t change their view that the economy was probably growing by a brisk 4.5% rate in the January-to-March quarter and will log another year of solid -- though slower -- growth for all of 2006.

“The economy is doing pretty well now in terms of momentum,” said Brian Bethune, economist at Global Insight.

The economy ended 2005 on wobbly footing, expanding at an annual rate of just 1.6% in the October-to-December quarter, the worst showing in three years, the Commerce Department said.

While better than the first estimate of a 1.1% growth rate for the quarter, the new figure still showed a loss of momentum from the third quarter’s quick 4.1% pace. The slowdown was blamed on lingering fallout from the Gulf Coast hurricanes and the toll of lofty energy prices, which especially caused consumers to tighten their belts.

Another report provided further evidence that the housing market, which posted record high sales five years in a row, had lost its sizzle.

Sales of previously owned homes dropped 2.8% in January to a rate of 6.56 million units, the slowest pace in two years, according to the National Assn. of Realtors.

The median home price -- where half sell for more and half for less -- was $211,000 in January. That was the same as in December but up 11.6% from a year earlier.

Analysts said the report was consistent with their forecasts for a gradual cooling -- not a jarring collapse -- in the housing sector this year.

A third report indicated that consumers’ confidence in the economy dipped in February to 101.7, from 106.8 in January, the Conference Board said. People are anxious about economic conditions over the next six months. Their assessment of current conditions, however, held steady at a 4 1/2 -year high.

“Consumers remained optimistic about their present situation, but going forward, sentiment is a bit shaky,” said Sherry Cooper, chief economist at BMO Nesbitt Burns.

Businesses’ investment in equipment and software, export growth and inventory building by companies all turned out to be better than first estimated, leading to the higher reading on gross domestic product in the final quarter of 2005. Less deep cuts in government spending also contributed to the upgraded GDP reading.

GDP measures the value of all goods and services produced within the United States and is the best measure of the country’s economic fitness.

Consumer spending -- usually a main force of economic activity -- rose at a rate of just 1.2% in the final quarter of 2005, the slowest since the second quarter of 2001.

Analysts predict that consumer spending will revive in the current quarter.