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Economy Shrank At 0.1 Percent Annual Rate In Fourth Quarter

Filed by KOSU News in Business.
January 30, 2013

The U.S. economy shrank at a 0.1 percent annual rate in the fourth quarter, the Bureau of Economic Analysis reports, its first quarterly contraction since the second quarter of 2009.

Economists were not expecting to hear that. Before the number was released, they were predicting BEA would say there was modest — 1.1 percent — growth in the last three months of 2012.

According to BEA: “the decrease in real [gross domestic product] in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures, nonresidential fixed investment, and residential fixed investment.” The Associated Press says the main factor was “the biggest cut in defense spending in 40 years.”

More defense cuts are ahead unless lawmakers act to prevent the automatic “sequester” that kicks in on March 1.

Today’s fourth-quarter GDP report is the first of three estimates BEA will issue, so there is a chance that in coming months it will say that there was at least some growth in the quarter. The next estimate is due on Feb. 28.

Also in the report, BEA said that the economy grew 1.5 percent from the end of 2011 through the end of 2012. Comparisons:

– 2 percent growth from the end of 2010 through 2011.

– 2.4 percent growth from the end of 2009 through 2010.

– A 0.1 percent decline in GDP from the end of 2008 through 2009.

– A 3.3 percent decline in GDP from the end of 2008 through 2008.

Technically, the economy went into recession at the end of 2007 and emerged in mid-2009. [Copyright 2013 NPR]

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