The U.S. economy slowed substantially in Q4 2007 to a 0.6% annualized rate, the U.S. Commerce Department announced Thursday, in its final estimate for the quarter. It was the slowest annualized growth rate since 2002.

Economists surveyed by Bloomberg News had expected the final Q4 2007 GDP statistic to be 0.6%.

For 2007, the U.S. economy grew 2.2%, after adjusting for inflation -- its slowest growth rate in five years. The U.S. economy grew 2.9% in 2006.

In dollar terms, U.S. GDP in 2007 totaled $13.84 trillion, not adjusted for inflation.

In Q4 2007, business inventories increased 6%, exports increased 6.5%, government spending rose 2%, imports fell 1.4% and residential investment plummeted 25.2%.

The report was a virtual carbon-copy of the Commerce Department's earlier estimate for Q4 2007 GDP, save new data on corporate profits, which were revised $37.9 billion lower to a $1.11 trillion annualized rate. Corporate profits after taxes are up 3.3% from a year ago.

Retail inflation revised lower

Meanwhile, final statistics on Q4 2007 and 2007 inflation shows that while retail inflation remains elevated, it's not as bad as many had feared, given the large increase in energy prices over the past year. Final inflation statistics show that the consumer price index increased at an annualized rate of 3.9% in quarter, down from the previous estimate of 4.1%. Further, the core rate -- which excludes food and energy -- rose at a 2.5% rate in Q4 2007, down from the previous estimate of 2.7%.

Economist Glen Langan told BloggingStocks Thursday the final Q4 2007 statistic signals to him that the U.S. economy is in a recession. "If you look at the consumption slowdown, it's signaling that we're in recession. The 0.6% Q4 growth stat basically is a slow-growth recession and we could have easily gone negative in Q4," Langan said. "I expect we'll be negative in Q1 2008 at about negative 0.4-0.8% and in Q2 at about negative 0.3-0.5%."

The Commerce Department will release its advance report on Q1 2008 GDP growth on April 30, and Langan expects to see even more signs of commercial activity slowing at that time. "At that time, the full effect of higher energy prices will be seen, and that will show up in the consumer demand components of the index," he said. "The consumer has been in a recession for quite some time now."

Langan added that, given the recession, he expects U.S. GDP growth to total just 1.1-1.5% in 2008.