Posted on 01/30/2013 8:06:42 AM PST by SeekAndFind
Apparently, the shrikage is largely the result of a big hit in defense spending. Other one time factors also played a role.
From Associated Press:
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The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter and the first contraction since the second quarter of 2009.
Economists said the surprise decrease in the nation's gross domestic product wasn't as bad as it looked. The weakness was primarily the result of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth. Those volatile categories offset a 2.2 percent increase in consumer spending, up from only 1.6 percent in the previous quarter. And business spending on equipment and software rose after shrinking over the summer.
"Frankly, this is the best-looking contraction in U.S. GDP you'll ever see," Paul Ashworth, an economist at Capital Economics, said in a note to clients. "The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging."
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We can certainly hope that Ashworth is correct. But it should be pointed out that even if the 4th quarter numbers are revised upwards in coming months, it will end up no where near the 3.1% growth in the 3rd quarter.
(Excerpt) Read more at americanthinker.com ...
Real federal government consumption expenditures and gross investment decreased 15.0 percent in the fourth quarter, in contrast to an increase of 9.5 percent in the third. National defense decreased 22.2 percent, in contrast to an increase of 12.9 percent. Nondefense increased 1.4 percent, compared with an increase of 3.0 percent. Real state and local government consumption expenditures and gross investment decreased 0.7 percent, in contrast to an increase of 0.3 percent.
So we will get those critical low paid low skill workers at exactly the right time, from the Rubio/Obama plan.
That should jump start things
All the bad data that was trotted out to get Bozo reelected is starting to bounce back.
All this was known before the Election.
The coverup against the people of the United States
of America extends from BenGhazi right to the Fed.
RE: All the bad data that was trotted out to get Bozo reelected is starting to bounce back.
Obama will blame it on Bush in 5,4,3....
It has been suggested that the only thing holding up the GDP number has been the runaway deficit spending by the federal government. That’s why deficit spending is so important to the Democrats.
Should be good for another 200+ jump in the DOW.
Gee and all the low information voters (a.k.a. morons) voted for Obozo because they believed that the economy was turning around. I expect negative GDP growth for the next three years.
“Gee and all the low information voters (a.k.a. morons) voted for Obozo because they believed that the economy was turning around. I expect negative GDP growth for the next three years.”
A majority of Americans don’t even know what the GDP is, or why being negative is an issue.
OK FRiends, someone help me here. Is a 1% contraction an actual GDP of -1% or is it a 3.1% - 1% = 2.1% GDP growth?
I hear the dem’s are touting this as great news!
Only democrats with their media lapdogs can tell you they are the only ones that can pick up a turd from the clean end.
Under the old definition, this would be half-way to a “Recession”
But the MSM won’t call it this because Obama is in office.
Thank you, Obama.
No, it’s a NEGATIVE growth number, not a DECLINE in the previous quarter rate. So the Economy CONTRACTING (NEGATIVE) instead of EXPANDING (POSITIVE)
All this was known before the Election.
...However, they point to the contraction in federal spending as the main culprit:
Correct, the sharp GDP contraction was due to government defense spending contraction from sharply "juiced up" defense spending in Q3. Amazingly, Romney and the Republicans somehow didn't make that an issue in their campaigns:
The Pentagon's Timely Contribution to GDP (3rd Quarter 2012) - FR / Barron's, posted by CutePuppy, 2012 November 05
"However, one-third of the increase came from a surge in defense spending which, of course, has nothing to do with the imminent presidential election," Mike writes in italics, in case you didn't get his point.
So in Q4 it was reversed, and what we got was entirely expected, nothing "unexpected" about it: After increasing to a pace of $60.3B in Q3, growth in inventories plunged to $20.0bn in Q4. This swing sliced 1.3% from growth. ... Nonfarm inventories also contracted, which was likely as a result of businesses caught by a stronger demand at year-end. Bounce back in inventories in Q1 could add notably to Q1 GDP growth. ..... Government spending declined 6.6% owing to a 22% drop in defense spending. This more than offset the 12.9% increase in defense spending in 2012Q3. It is possible that the DoD reduced spending in anticipation of the "fiscal cliff" cuts. If the sequester kicks in as expected, we would expect further cuts in government spending starting in 2013Q2. ..... Consumption increased 2.2%, an improvement from the prior two quarters and owing to stronger vehicle sales. Investment surprised on the upside with capex jumping 12.4% and residential investment up 15.3%. Based on the latest core capital goods orders, the gain in capex could persist into 2013Q1, showing further improvement in corporate sector. Also on a positive note, personal income was revised higher in 2012Q4 due to "fiscal cliff" accelerated dividends and bonus income. ..... ... GDP growth was dragged down by a sharp contraction in government defense spending and inventory accumulation, which combined subtracted 2.6% from growth. Outside of these two very volatile components, underlying growth improved with a solid gain in business investment. .....
Basically, "juicing up" (for election purposes) the economy via defense spending in Q3, combined with "fiscal cliff" distortions in the Q4, combined with expectations of sequestration, has led to distortions that will take some time to unravel.
Otherwise, the economic story is the same: corporations are cutting expenses, preparing for mandatory expenses and hoarding cash (particularly overseas) leading to anemic, only necessary hiring, resulting in healthier balance sheets and higher stock prices (don't confuse the health of the stock market with the health of the economy!), elevated un-/under-employment numbers and general "economic "malaise" despite successful heroic efforts of the Fed to keep economy from sliding into recession due to boneheaded fiscal and regulatory policies of the Obama administration.
> Economists said the surprise decrease...
Economists surprised? That was unexpected.
Thank you, that is what I thought but the article was not very clear.
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