The Deciderer has speechified!

WASHINGTON (AP) -- The economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.

Wednesday's Commerce Department report showed that the economy that deteriorated considerably during the October-to-December quarter as worsening problems in the housing market and harder-to-get credit made individuals and businesses more cautious in their spending. Fears of a recession have grown, even as inflation remained elevated.

For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse was the biggest culprit; builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.

But that doesn't matter! Consumers are confident!:

Consumer spending, which is a key to economic activity, slowed to a two per cent annual pace in the fourth quarter, down from 2.8 per cent in the previous quarter.

Businesses also responded by shaving their inventories of goods, which trimmed 1.25 percentage points from fourth-quarter gross domestic product.

"The U.S. economy fired on just two cylinders late last year (business investment and exports), both of which are likely to downshift just when the consumer faces brisk headwinds," said BMO Capital Markets economist Sal Guatieri in a commentary.

"Looking ahead, we expect consumer spending to slow further in the first quarter of 2008, reflecting softer labour markets, elevated energy prices and declining house prices," said RBC economist Rishi Sondhi.

"On the corporate side, we also expect some weakening in business investment, owing to the effects of the financial market deterioration," Sondhi added.

We're not panicking:

WASHINGTON (AP) -- The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible.

The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.

The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.

In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."

Recalling an earlier post, remember the discussion of liquidity traps.

But there's no need for panic. Not yet, anyway.