WASHINGTON, April 9 (Reuters) - U.S. economic growth slowed more than previously estimated in the fourth quarter amid downgrades to business investment, including inventory accumulation, but corporate profits increased sharply, government data showed on Thursday.

Gross domestic product increased at a downwardly revised 0.5% annualized rate, the Commerce Department's Bureau of Economic Analysis said in its third GDP estimate. The economy was previously reported to have grown at a 0.7% pace in the fourth quarter. The advance estimate had put GDP growth at 1.4%.

Economists polled by Reuters had forecast GDP growth would be unrevised at a 0.7% rate. Revisions to the fourth quarter's growth pace reflected downgrades to business spending on intellectual products as well as inventories.

Growth in consumer spending, which accounts for more than two-thirds of the economy, was revised down to a 1.9% pace from the previously reported 2.0% rate.

Last year's shutdown of the government was the key driver of the slowdown from the third quarter's 4.4% growth pace.

Neither the third- nor fourth-quarter GDP readings are true reflections of the economy's health.

Final sales to private domestic purchasers, which excludes government, trade and inventories, grew at a 1.8% pace in the fourth quarter. This measure of domestic demand, closely watched by policymakers, was previously estimated to have increased at a 1.9% rate. Domestic demand grew at a 2.9% pace in the July-September quarter.

Profits from current production increased at a rate of $246.9 billion in the fourth quarter, surging from a $175.6 billion growth pace in the third quarter.

When measured from the income side, the economy grew at a 2.6% rate in the fourth quarter. Gross domestic income increased at a 3.5% pace in the July-September quarter.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, grew at a 1.5% rate. Gross domestic output grew at a 4.0% rate in the third quarter.

Though growth likely picked up in the first quarter, the U.S.-Israeli war on Iran is casting a cloud over the economy.