U.S. Economy: Growth Slows to 1.6% Rate as Homebuilding Slumps

The U.S. economy grew at a 1.6 percent annual rate last quarter, the slowest pace in more than three years and less than economists forecast, as housing slumped and the trade deficit widened.

The first estimate of the quarter's gross domestic product, the value of all goods and services produced in the U.S., compares with a 2.6 percent gain from April through June, the Commerce Department reported today in Washington. A gauge of inflation watched by the Federal Reserve eased.

Stocks declined and bonds advanced after the report, which showed homebuilding fell by the most in 15 years and the trade gap worsened as consumers bought more foreign-made goods. A drop in energy prices that gathered momentum late in the quarter is sustaining spending and restraining inflation, helping persuade Fed Chairman Ben S. Bernanke to leave interest rates alone.

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