The U.S. economy cooled during the final quarter of 2005 as consumers curbed spending in the face of higher energy prices and the U.S. trade imbalance continued to damp growth.

The U.S. Commerce Department said today that gross domestic product rose at a seasonally adjusted 1.1% annual rate in October through December.

The gain was slimmer than the third quarter’s 4.1% increase, and marked the weakest quarterly showing since the final quarter of 2002, when GDP rose 0.2%.

For all of 2005, GDP advanced 3.5%. It grew 4.2% in 2004 and 2.7% in 2003.

Much of the weakness in the fourth quarter was accounted for by slower consumer spending. Consumer outlays, which account for more than two-thirds of U.S. economic activity, rose 1.1%, after climbing 4.1% in the third quarter. That weakness stemmed largely from a steep drop in spending on big-ticket manufactured items.

Outside of the durables category, other consumer spending was relatively healthy. Fourth-quarter nondurables spending rose 5.1%, while services spending went up 3.2%.

Meanwhile, a wide gap between what the U.S. ships abroad and what it purchases from overseas shaved more than a percentage point from the rate of growth, as U.S. exports rose by 2.4% while imports increased 9.1%. In the third quarter, the picture was more balanced: exports had rised 2.5% as imports rose 2.4%.

In a separate report Friday, the Commerce Department reported that sales of new homes took a surprise turn upward in December, increasing 2.9% to a seasonally adjusted annual rate of 1.269 million. An estimated 1,282,000 new homes were sold in all of 2005, up 6.6% from 2004[s 1,203,000 and the highest level on record. The yearly figures are not adjusted.

Price appreciation of new homes cooled last month. The average price of a home decreased to US$272,900, down from a revised US$286,000 in November, while the median price fell to US$221,800 from a revised US$226,800.