GDP Drops 0.1% in Fourth Quarter


0  Updated at 9:11 am, January 30th, 2013 By: ABC Digital
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Comstock Images/Thinkstock(NEW YORK) — The U.S. economy shrank last quarter for the first time since 2009, surprising many experts who didn’t expect to see a contraction.

According to Commerce Department figures released on Wednesday, gross domestic product, or GDP, decreased 0.1 percent in the fourth quarter.

“Most economists were anticipating a sharp slowdown between Q3 and Q4 but economists were not expecting a slowdown to the degree that actually pushed it into a contraction,” Carl Riccadonna, the senior U.S. economist at Deutsche Bank, tells ABC News Radio.

He says the drop was largely due to one-time factors, like cuts in defense spending, fewer exports and slower inventory growth.

“Inventories alone subtracted about 1.3 percent off of the growth rate, then also, there was a sharp slowdown in government spending on defense and that subtracted another 1.3 percent,” Riccadonna says.

But, as he notes, the contraction is not as bad as it looks.  There were pickups in consumer and business investment spending.

“If you look at that headline number, you say, ‘Oh, contraction: Boy, we’re on the cusp of recession,’ but that’s really a misleading story and as you look at the underlying details, it’s still very much consistent with an economy that continues to regain its footing,” Riccadonna says.

“This does still bode decently for economic output in the current quarter,” he adds.

Copyright 2013 ABC News Radio

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