By Jeannine Aversa
The Associated Press

WASHINGTON - The economy didn't falter as badly in the final quarter of last year as first thought. A new reading showed growth at a 1.4 percent pace - still slow but twice as fast as the government previously estimated.

While economists welcomed the upward revision to gross domestic product reported Friday by the Commerce Department, they said it didn't change the basic picture of the $10.6 trillion economy: It is listless.

"I think the economy is rudderless," said Richard Yamarone, economist at Argus Research Corp. Although he thinks that the economy will stay in a funk for much of 2003, most other analysts are hopeful that the recovery will get noticeably stronger in the second half of the year.

In fact, many think that the economy is already doing better in the January-March quarter, with estimates of growth at a 2.5 percent pace or more.

If a war breaks out with Iraq, though, economic activity would probably be crimped - initially - if consumers and business turn more cautious, economists said.

The government first estimated that GDP in the fourth quarter of 2002 grew at an annual rate of 0.7 percent. The revised reading is based on more complete data.

GDP measures the total value of goods and services produced within the United States and is considered the best barometer of the economy's health.

The major factors in the upward revision were stronger investment by businesses in building up stockpiles of unsold goods and a slight boost to consumer spending.

The fourth-quarter estimate still was a big slowdown from the third quarter's 4 percent pace.

Consumer spending, which accounts for two-thirds of all economic activity in the United States, increased at a rate of 1.5 percent in the fourth quarter. That was a slight improvement over the 1 percent pace previously reported but still was a big pullback from the robust 4.2 percent rate in the third quarter.