The annualised figure was better than an earlier estimate of 0.1% growth, reflecting increased investments in plant and equipment.

However, despite the upwards revision, the department warned that the economy remained "sluggish".

The latest figures were a marked slowdown from the previous quarter.

An acute fall in defence spending and government expenditures hurt economic output, said the department.

"While non-residential fixed investment is higher than previously estimated, the revision to GDP [gross domestic product] has not changed the general picture of the economy," said a statement.

The October-December figures came amid hopes that the US economic recovery is gathering steam, following a string of recent data showing rising home sales and an improving labour market.

Wall Street shares opened flat on Thursday, with the S&P 500 index hovering near its all-time closing high.

"Fundamentally, the economy is improving and we are getting good earnings," said Jack DeGan, chief investment officer of Harbor Advisory.BMO Capital Markets economist Jennifer Lee described the revised fourth quarter rate as "still disappointing", but said that the investment bank was expecting US GDP to increase by 2.2% this year, the rate at which the economy grew last year.

In a report last week, the US Federal Reserve said that the economy had strengthened "moderately" but still needed stimulus measures to underpin recovery.

The Fed has said it would keep its policy of buying $85bn a month of Treasury bonds and mortgage-backed securities in order to lower borrowing costs for households and businesses.

Although US joblessness has fallen, the Fed said it wanted to see signs of a long-term trend of falling unemployment.