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Economy contracts in 4th quarter by 0.1%
American Thinker ^ | 01/30/2013 | Rick Moran

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:

_____________________

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."

_________________________

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 ...


TOPICS: Business/Economy; Front Page News
KEYWORDS: defense; economy; gdp; spending; unexpected

1 posted on 01/30/2013 8:06:45 AM PST by SeekAndFind
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To: SeekAndFind
Business Insider notes that the expectations were around 1.1% for Q4, which would have been a big drop in itself from Q3′s 3.1%. However, they point to the contraction in federal spending as the main culprit:

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.


2 posted on 01/30/2013 8:08:00 AM PST by SeekAndFind
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To: SeekAndFind

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


3 posted on 01/30/2013 8:11:06 AM PST by sickoflibs (Losing to Dems and Obama is not a principle! Its just losing.)
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To: SeekAndFind

All the bad data that was trotted out to get Bozo reelected is starting to bounce back.


4 posted on 01/30/2013 8:11:50 AM PST by wolfman23601
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To: SeekAndFind

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.


5 posted on 01/30/2013 8:13:46 AM PST by Diogenesis (Vi veri veniversum vivus vici)
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To: wolfman23601

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....


6 posted on 01/30/2013 8:14:01 AM PST by SeekAndFind
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To: SeekAndFind

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.


7 posted on 01/30/2013 8:16:21 AM PST by Senator_Blutarski
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To: SeekAndFind

Should be good for another 200+ jump in the DOW.


8 posted on 01/30/2013 8:18:38 AM PST by MeneMeneTekelUpharsin (Freedom is the freedom to discipline yourself so others don't have to do it for you.)
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To: SeekAndFind

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.


9 posted on 01/30/2013 8:20:45 AM PST by The Great RJ
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To: The Great RJ

“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.


10 posted on 01/30/2013 8:28:09 AM PST by brownsfan (Behold, the power of government cheese.)
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To: SeekAndFind

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?


11 posted on 01/30/2013 8:32:34 AM PST by CSM (Keeper of the Dave Ramsey Ping list. FReepmail me if you want your beeber stuned.)
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To: SeekAndFind

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.


12 posted on 01/30/2013 8:32:43 AM PST by edcoil (Manage your own lawsuit: www.jurisdictionary.com?refercode=KK0012)
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To: SeekAndFind

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.


13 posted on 01/30/2013 8:36:04 AM PST by kidd
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To: SeekAndFind

Thank you, Obama.


14 posted on 01/30/2013 8:42:48 AM PST by Andrei Bulba (No Obama, no way!)
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To: CSM

No, it’s a NEGATIVE growth number, not a DECLINE in the previous quarter rate. So the Economy CONTRACTING (NEGATIVE) instead of EXPANDING (POSITIVE)


15 posted on 01/30/2013 8:49:11 AM PST by timlilje
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To: wolfman23601; Diogenesis; SeekAndFind
All the bad data that was trotted out to get Bozo reelected is starting to bounce back.

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

So in Q4 it was reversed, and what we got was entirely expected, nothing "unexpected" about it:

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.

16 posted on 01/30/2013 9:07:28 AM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: SeekAndFind

> Economists said the surprise decrease...

Economists surprised? That was unexpected.


17 posted on 01/30/2013 9:16:11 AM PST by BinaryBoy (GOP: New leadership NOW!)
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To: timlilje

Thank you, that is what I thought but the article was not very clear.


18 posted on 01/30/2013 9:35:42 AM PST by CSM (Keeper of the Dave Ramsey Ping list. FReepmail me if you want your beeber stuned.)
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