The gross domestic product (GDP) measures the value of all goods and services produced in the United States and is the best barometer of the country's economic health.
Many economists say they believe growth in the current January-to-March quarter will be even weaker than the 0.6 percent figure of the previous quarter. A growing number also say the economy may actually be shrinking now. Under one rough rule, the economy needs to contract for six straight months to be considered in a recession. The government will release its estimate for first-quarter GDP in late April.
In another report, fewer people signed up for unemployment benefits last week, although that didn't change the broader picture of a deteriorating jobs market. The Labor Department said jobless claims fell by 9,000 to 366,000, a better showing than many economists were forecasting. Still, unemployment is expected to rise this year given all the problems clobbering the economy.
The newly released fourth-quarter GDP figure matched analysts' expectations.
Thursday's report underscored the damage to the economy from the collapse in the housing market, which has dragged down housing prices, pushed home foreclosures up to record highs and has led to a glut of unsold homes. Against that backdrop, builders slashed spending on housing projects by a whopping 25.2 percent on an annualized basis in the fourth quarter, the biggest cut in 26 years.
An inflation measure linked to the GDP report showed that overall prices increased at a rate of 3.9 percent in the fourth quarter. That was not as high as previously estimated but marked a big pickup from the third quarter's 1.8 percent pace.
Another gauge showed that "core" prices -- excluding food and energy -- grew at a rate of 2.5 percent at the end of last year. That was down from a previous estimate of a 2.7 percent pace but was up from the prior quarter's 2 percent growth rate.
The new core inflation figure is above the Fed's comfort zone -- the upper bound of which is a 2 percent inflation rate.
Although the Fed's No. 1 job is trying to save the economy from a deep and prolonged recession, it is also keeping close tabs on inflation and soaring energy prices.