THE US economy grew slightly in the fourth quarter last year, the government says, revising its prior estimate of a small contraction.
Gross domestic product grew at an annual rate of 0.1 per cent in the October-December period, the Commerce Department said in its second official estimate. In its initial estimate in January, GDP contracted by 0.1 per cent.
"While today's release has revised the direction of change in real GDP, the general picture of the economy for the fourth quarter remains largely the same as what was presented last month," the department said.
The revision did not change the growth rate for all of 2012 of 2.2 per cent, helped by a solid 3.1 per cent pace in the third quarter.
Scott Hoyt of Moody's Analytics said the scant growth in the revised reading "highlights the impact the budget negotiations in Washington and weakness of overseas economies have had on the US economy".
The slowdown reflected sharp drops in inventory building and federal government spending ahead of the January 1 "fiscal cliff" of across-the-board automatic tax hikes and spending cuts.
Private inventories and government spending each fell roughly 1.5 per cent.
A drop in exports, by 0.6 per cent, also contributed to the slower GDP growth.
Consumer spending, which drives about 70 per cent of US economic activity, was revised down a notch, to 2.1 per cent from 2.2 per cent.
Most analysts expected a stronger GDP reading of 0.5 per cent growth for the final quarter amid signs the economy was picking up in the first quarter.
"While not negative any more, the weakness in Q4 GDP still looks grossly exaggerated; other data, such as employment growth and the ISM indexes, suggest that the trend is at least 2.0 per cent, perhaps better than that," said Jim O'Sullivan, chief US economist at High Frequency Economics.
Federal Reserve chairman Ben Bernanke, in testimony to Congress on Tuesday and Wednesday, warned economic growth remained uneven and could be further hurt by the government's steep budget cuts, or sequester, slated to take effect on Friday.