At the Wall Street Journal, "U.S. Economy Unexpectedly Contracts in Fourth Quarter":
U.S. economic momentum screeched to a halt in the final months of 2012, as lawmakers' struggle to reach a deal on tax increases and budget cuts likely led businesses to pare inventories and the government to cut spending.And see all the buzz at Memeorandum. The idiot leftist are blaming it on the decline in defense spending, losers.
The nation's gross domestic product shrank for the first time in 3 1/2 years during the fourth quarter, declining at an annual rate of 0.1% between October and December, the Commerce Department said Wednesday.
It was the first time the broad measure of all goods and services produced by the economy contracted since the recovery from the financial crisis began. Economists surveyed by Dow Jones Newswires had expected 1.0% annualized growth.
The decline reflects worries about the so-called fiscal cliff. The economy reversed from a 3.1% pace of growth in the third quarter largely because federal government spending fell by 15% and private business, likely fearing slack in demand, let inventories dwindle.
"Think of it as a giant hand holding down the economy," said Tim Hopper, chief economist at TIAA-CREF. "The underlying fundamentals are quite strong."
With the worst effects of the pending budget cuts and tax increases averted after Congress and the White House reached an agreement this month, Mr. Hopper said he expects the economy to return to moderate growth this year.
However, tax increases and possible federal budget cuts could weigh on advances in the first half of the year, said Stuart Hoffman, chief economist at PNC Financial Services Group PNC +0.03% . Exports are still a concern because of the recession in Europe.
"The economy has less momentum going into 2013 than initially thought, making it vulnerable to external shocks," Mr. Hoffman said in a research note. "A turnaround in the housing market will be a key support to the economy this year."
For all of 2012, gross domestic product expanded 2.2%, an improvement compared with 1.8% growth in 2011.
The decline in federal spending last quarter was the largest drop since 1973. Spending at all levels of government fell 6.6% in the period.