The US Department of Commerce has unexpectedly cut its estimate of fourth-quarter growth to an annualised 2.8%, from 3.2% previously.
Analysts had instead expected the figure to be revised up slightly to 3.3%.
Lower government spending than previously estimated was the main reason for the downward revision.
Economic growth for the whole of 2010 was also revised down slightly, from 2.9% to 2.8%.
As well as lower state and local government spending during the final three months of last year, consumer spending grew at a slower rate than previously estimated.
Despite the downward revision, Wall Street gained ground in early trading, with the Dow Jones index rising 42 points to 12,110 as the price of oil retreated from the two-and-a-half year highs seen on Thursday.
Well. looks like Krugman was right again. Even though Republicans bashed him all over the place for his position, economist Paul Krugman predicted that restraining government spending would indeed slow economic growth and, as this report indicates, it has. So as the GOP continues to preach the economics of destruction through less spending and austerity measures for the lower classes, they are actually sowing the seeds for another economic collapse just as our fragile economy looks to rebound. But, as Mitch McConnell said, it's all about making Barack Obama a one term president. Besides, why should the GOP worry about something as silly as the economy? Their friends on Wall Street are doing just fine which means campaign contributions will be unaffected even if these good times did come at the expense of food benefits for poor families.
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