After showing signs of markedly slower growth in the second quarter, economic activity decelerated to a much more subdued pace during the third quarter. Real gross domestic product (GDP) increased at an annual rate of only 1.6% in the third quarter following an increase of 2.5% in the second quarter and 5.6% during the first quarter of 2006. The third quarter figure is lower than the paltry increase of 1.8% in the fourth quarter of 2005. Real GDP increased at an annual rate of 3.2% for the full year 2005 on a revised basis. The deceleration in real GDP continued in the third quarter despite a pause in rate tightening by the Federal Reserve’s Federal Open Market Committee (FOMC) and noticeable weakness in energy prices that had been at elevated levels for over a year. Economic activity was restrained partly due to a decreased level of private inventory investment, perhaps as businesses sought a draw down in inventory levels that may have accumulated during the first half of the year, and increased import activity.