Economic Growth Slowed More Sharply Than Forecast in Fourth Quarter

The latest report of the gross domestic product shows the economy grew more slowly than expected in the fourth quarter.

GDP, as the report is known, was up 1.4% in the last quarter of 2000, according to preliminary results released this morning. This is the smallest gain since the second quarter of 1995. Economists had expected GDP to increase 1.9%, compared to the 2.2% pace in the third quarter of 2000.

Gross domestic product measures the change in the market value of goods, services and structures produced in the economy. The release also includes a key inflation measure called the price index for gross domestic purchases. It measures the prices of everything -- including imports -- that Americans buy. Personal consumption expenditures typically account for roughly 68% of GDP. Investment, government spending and net exports account for the rest. Economists were projecting the implicit price deflator to rise to 2.0% from 1.6% in the third quarter. The lower the GDP and inflation numbers are, the more aggressive the Fed is likely to be with interest rates.

Other data released today include the Chicago Purchasing Managers Index for January, out at 10:00 a.m.-- which is expected to fall to 43.7 from 44.2. The Chicago PMI is seen as a good gauge of what to expect from the National Purchasing Manager's Index, which comes out a few days later. This number signals factory-sector expansion when it is above 50 and contraction when below it. It has been declining in the past few months.

TheStreet.com's David Gaffen took a look at what comes next for the markets after the Fed announces its decision about interest-rates when its meeting concludes this afternoon. This GDP report bodes well for a significant rate cut since it shows the economy needs more of a jump start.

Consumer confidence levels have been dropping along with data that shows the economy slowing. Wall Street expects that Mr. Greenspan and his band of merry men will cut interest rates by 50 basis points today in an attempt to alleviate the pain of an ailing economy.

8:30 a.m.: Gross domestic product for Q4-advance. Source: Commerce Department. Actual: 1.4%. Forecast: +1.9%. Previous: +2.2% (Q3). Implicit price deflator: Actual: 2.2%. Forecast: +2.0% Previous: +1.6% (Q3).

Forecasts are from Reuters. Times are Eastern. For a longer-term economic calendar and more, see TheStreet.com's Economic Databank.