Unexpectedly (Again)! U.S. Economy Contracts in Fourth Quarter

It sure does seem like every bit of bad economic news we get anymore is “unexpected.” When are economists going to expect that we’ll see little or no growth so long as the Obama administration continues to do everything they can to squash economic growth? My guess is they won’t.

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. 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. A one quarter contraction of economic output doesn’t mean the economy is formally in recession, but it is unusual for such contractions to happen in the middle of economic expansions. In fact, it has only happened one time in the past fifty years.  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.

via U.S. Economy Contracts in Fourth Quarter – WSJ.com.