AP via Yahoo! Finance: “US economy shrinks 0.1 pct., 1st time in 3 ½ years”
(A pretty short article, pretty easy read and good info)
So the economy shrinking for the first time in 3.5 years while the US economy is in the midst of a slow recovery is terrible right?
Wellllll yeah, but also no because the economy is not actually going down really…sort of.
The economy went down due to one-time cuts in government spending. The economy shrank by 0.1% in the fourth quarter while in the third quarter it grew by 3.1%. Bad, right?
Well if we ignore the government part and focus on consumer spending, it actually went up, from 1.6% in the third quarter to 2.2% in the fourth quarter.
And looking at the year overall, 2012’s economy grew by 2.2% while 2011’s economy grew by 1.8%.
This bit summarizes it nicely:
“Frankly, this is the best-looking contraction in U.S. GDP you’ll ever see,” said Paul Ashworth, an economist at Capital Economics. “The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging.”
- Business investment also up
- Exports down though, due to the 1-2 punch of China’s slowing economy and Europe’s continued troubles
- Economic reports likely to be shaky for the near future as consumers’ reactions to the social security tax and income tax increases peter out
- Likewise for consumer confidence reports
- Jobs report for January to come on Friday, refer to prior two bullet points for expectations (≈7.8% again probably)