American economy contracts 0.1% in Q4
Source: Agencies |
January 31, 2013, Thursday
|
Print Edition
Print Edition
THE US economy unexpectedly shrank from October through December for the first time since 2009, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles. The drop occurred despite stronger consumer spending and business investment.
The US Commerce Department yesterday said the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That was a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.
Economists said the drop in gross domestic product wasn't as bleak as it looked. The weakness was mainly the result of one-time factors. Government spending cuts and slower inventory growth, which can be volatile, subtracted a total of 2.6 percentage points from GDP.
But the fact that the economy shrank at all, combined with much lower consumer confidence reported on Tuesday, may raises fears about the economy's durability in 2013. That's because deep automatic government spending cuts will cut into domestic and defense programs starting in March unless Congress reaches a deal to avert them.
And Americans are coming to grips with an increase in Social Security taxes that has begun to leave them with less take-home pay.
Still, the government spending cuts and slack inventory growth in the fourth quarter offset a 2.2 percent increase in consumer spending. And business spending on equipment and software rose after shrinking over the summer.
Consumer spending added 1.5 percentage points to GDP, and business investment added 1.1 points - both stronger contributions than in the third quarter.
"Frankly, this is the best-looking contraction in US GDP you'll ever see," said Paul Ashworth, an economist at Capital Economics. "The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging."
And for all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.
Exports fell by the most in nearly four years, likely a result of Europe's recession and slower growth in China and some other large developing countries.
Incomes, though, jumped last quarter as companies paid out special dividends and bonuses ahead of expected tax increases in 2013. Commerce estimated businesses paid nearly US$40 billion in early dividends.
The US Commerce Department yesterday said the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That was a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.
Economists said the drop in gross domestic product wasn't as bleak as it looked. The weakness was mainly the result of one-time factors. Government spending cuts and slower inventory growth, which can be volatile, subtracted a total of 2.6 percentage points from GDP.
But the fact that the economy shrank at all, combined with much lower consumer confidence reported on Tuesday, may raises fears about the economy's durability in 2013. That's because deep automatic government spending cuts will cut into domestic and defense programs starting in March unless Congress reaches a deal to avert them.
And Americans are coming to grips with an increase in Social Security taxes that has begun to leave them with less take-home pay.
Still, the government spending cuts and slack inventory growth in the fourth quarter offset a 2.2 percent increase in consumer spending. And business spending on equipment and software rose after shrinking over the summer.
Consumer spending added 1.5 percentage points to GDP, and business investment added 1.1 points - both stronger contributions than in the third quarter.
"Frankly, this is the best-looking contraction in US GDP you'll ever see," said Paul Ashworth, an economist at Capital Economics. "The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging."
And for all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.
Exports fell by the most in nearly four years, likely a result of Europe's recession and slower growth in China and some other large developing countries.
Incomes, though, jumped last quarter as companies paid out special dividends and bonuses ahead of expected tax increases in 2013. Commerce estimated businesses paid nearly US$40 billion in early dividends.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
