US economic growth braked sharply in the fourth quarter of last year, slowed by the weakest consumer spending in nearly a decade, the Commerce Department said.

Gross domestic product, or GDP, which measures total economic output within US borders, crept ahead at a 0.7 per cent annual rate in the October-December quarter.

That was a steep falloff from the four per cent growth rate posted in the third quarter and was the softest three-month performance of the year. During all of 2002, GDP grew 2.4 per cent, well ahead of the 0.3 per cent expansion in 2001 when the economy was in recession but behind the 3.8 per cent growth posted in 2000.

Analysts noted a few promising signs in the GDP report, including the first quarterly rise in business spending in nine quarters. Spending gained at a 1.5 per cent rate in the fourth quarter, led by more purchases of computers and software, after declining at a 0.8 per cent pace in the third quarter.

White House officials sought to portray the data both as proof the economy will avoid a double-dip recession and as a sign it urgently needs congressional approval of President George W. Bush's $674-billion, 10-year tax-cut program to keep it on track.

White House spokesman Ari Fleischer said Bush believed the economy "is emerging from the recession of 2001" but faces a "mixed" outlook. "He remains concerned about the strength of the economy. But I think the trend continues to be increased growth," Fleischer said.

But on Capitol Hill, White House economic adviser Glenn Hubbard said the economy remains "in a soft patch" and fourth-quarter GDP performance was "well under what we believe the economy's potential should be."

Strong government spending, especially on defense, helped support the economy in the fourth quarter. Defense spending is likely to remain high as the United States stages a military buildup toward possible conflict with Iraq but private forecasters said a stronger private-sector contribution was needed in the long run.

"The really scary part is that what little strength we see in the economy is driven by government spending, mainly for defense, which grew 4.6 percent (in the fourth quarter)," said Jerry Jasinowski, president of the National Association of Manufacturers.

Consumer spending, which accounts for about two-thirds of total GDP, increased at only a one per cent rate in the fourth quarter - the weakest growth since 0.8 per cent in the first quarter of 1993 - after shooting ahead at a 4.2 per cent rate in the third quarter.

Businesses increased inventories at a $3.3-billion rate in the closing quarter last year, a fraction of the $18.8-billion rate of stockpiling in the third quarter, which analysts said was a hopeful sign for the future.

"I think in the first quarter we'll see a bit of a bounceback, we know auto production is picking up and inventories were drawn down in the fourth quarter," said economist Mark Vitner of Wachovia Corp. in Charlotte, North Carolina.