US economy unexpectedly shrank in the 4th quarter of 2012

[Tender Branson]

The US economy unexpectedly shrank at an annualised rate of 0.1% in the fourth quarter of 2012, initial official estimates indicate.

If confirmed, it would be the first contraction logged by the US economy since the 2009 global recession.

The world's largest economy grew 3.1% in July to September.

The fourth quarter period was dominated by the "fiscal cliff" - the spending cuts and tax rises that had been due to come into force from 1 January.

These were avoided by a last-minute deal between the Republican-dominated Congress and the White House. However, economists warned at the time that fears of an abrupt cut in government spending were undermining business and consumer confidence.

However, part of that deal includes tax rises for the highest-earning Americans and - more significantly for the economy - the expiry of a payroll tax holiday for all US employees, something which is widely expected by economists to further weigh on growth during the current quarter.

http://www.bbc.co.uk/news/business-21261323

[King]

Temporary correction.  The private sector is still growing fine.

[Negusa Nagast 🚀]

Austerity contracts economies? Who knew!

[Person Man]

Austerity contracts economies? Who knew!

...but...but...Government Spending is wrong!

[wan]

Considering Europe has cut exports from the US by 20% and European tourism is down in the US by a similar amount, the figures are better than can be expected. Hurricane Sandy also took 50 billion out of the economy and 100s of thousands were left jobless. Then there is history. The jobs bill that would have added 1.5 million jobs into the system was blocked for strictly political grounds and the Republicans replaced it with their substitute folder labeled jobs bill which was a slew of tax cuts for the rich, an enhanced subsidy for job exporters and a raft of bills easing pollution restrictions around coal fired power stations. It would have better if the Republicans didn't block a bill aimed at cutting subsidies for job exporters and giving them tax breaks which would have been replaced with a bill that rewarded job importers with subsidies and tax incentives.

[King]

Austerity contracts economies? Who knew!

I wouldn't even call this a contraction.  Three-fourth's of the GDP calcualtion: private industry, inventories, and net imports rose.   It only fell a miniscule 0.1% because we slashed defense spending for the quarter at higher rate than the increase.

It's one of the big flaws of the GDP model.  This should be good news but the calculation makes it look worse than it is.  We're contracting the size of the government and the private sector is not reacting by contracting itself.  That's what we hope for.

Government spending should only be increasing when the other three are falling, as to relieve the pain, but should be decreasing whenever the other three are increasing as to avoid crowding out.  That's the great balancing act.

The good thing is that big business at least knows this.  Markets aren't moving at all on this news.

[opebo]

Economic boom a-comin' right on schedule.

[True Federalist (진정한 연방 주의자)]

With the economy contracting, we clearly need to cut government spending more to keep from overextending ourselves. (Yes, I'm being sarcastic.)

[Fmr. Pres. Duke]

We dropped because of the massive defense spending cuts. I expect this is temporary. I expect we will have strong numbers in Q12013.

[Sbane]

Also inventories dropped a lot which cut into the GDP as well. Low inventories with continued consumer demand bodes very well for future growth.

[Snowstalker Mk. II]

Barry Soetoro is finally unveiling his plan to bring America to its knees and allow the Socialist Caliphate to take over the world.

[Fmr. Pres. Duke]

I think a lot of this had to do with both the hurricane and the fiscal cliff. A lot of companies cut inventories and the like in preparation for what may come in the future should we go over the cliff. When we avoided it, we saw a huge run up in the markets in January. I expect we will see solid growth numbers this quarter.

[Politico]

Bush's fault.

[Warren 4 Secretary of Everything]

Bush's fault.

Holy frickin' Bat-crap Politico, you're alive!

[DINGO Joe]

The Trade balance numbers for December came in way better than expected and virtually guarantee that 4Q will be revised into the black.

[Fmr. Pres. Duke]

^^ and it was!