Uncle Sam cut spending and businesses drew down inventories in the fourth quarter of 2012, causing the U.S. economy to contract for the first time in more than three years.
But don’t start throwing around the R-word just yet.
“No one I know would seriously call this an indicator of recession,” said Bill Hampel, chief economist with the Credit Union National Association.
Gross domestic product, the broadest measure of the nation’s economic growth, contracted at an annual rate of 0.1% from October to December, the Commerce Department said Wednesday. It was the first quarterly contraction since the second quarter of 2009, amid the Great Recession.
While a contraction is never encouraging, economists pointed to temporary effects that may have caused a one-time dip, and they see better growth ahead.
It’s “the best-looking contraction in U.S. GDP you’ll ever see,” Paul Ashworth, chief U.S. economist for Capital Economics said in a research note. “The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging.”
A large cut in federal spending, primarily on defense, was one of the biggest drags on growth. Defense spending contracted at a 22% annual rate.
Okay, fair enough. But doesn’t Obama want to gut defense spending anyway? One of the few government expenditures that actually benefits everyone, and he wants to slash it.
Anyhow, so ends our era of “recovery” (snort). Thirteen consecutive quarters—over three years!—of growth (chortle), albeit only three quarters above 3%, with what to show for it? Historically low labor participation rate, record highs on welfare and disability. And now, shrinkage (guffaw).
And you wonder why I’m blogging less. Hope you like the new Eur-America, ’cause that’s what you got.