Real gross domestic product (GDP), the total output of goods and services in the U.S., decreased at an annual rate of 0.1 percent in the fourth quarter of 2012, the Bureau of Economic Analysis (BEA) announced Wednesday.
Needless to say, this misses expectations of a 1.1 percent increase and is a disappointing change from Q3’s +3.1 percent.
Let’s make this clear: Any GDP report under 2 percent in a nation with an aging population of 320 million IS BAD.
— John Podhoretz (@jpodhoretz) January 30, 2013
“The decrease in real GDP in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment,” the BEA said in a released statement.
“Imports, which are a subtraction in the calculation of GDP, decreased,” the report adds.
So what contributed to the Q4 downturn?
“The downturn in real GDP in the fourth quarter primarily reflected downturns in private inventory investment, in federal government spending, in exports, and in state and local government spending that were partly offset by an upturn in nonresidential fixed investment, a larger decrease in imports, and an acceleration in PCE,” the BEA said.
Meanwhile, the usual suspects are shocked — shocked! — that GDP saw a decrease in Q4.
“The U.S. economy unexpectedly shrank from October through December for the first time since 2009, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles [emphasis added],” the Associated Press reports.
“The economy unexpectedly contracted in the fourth quarter, suffering its first decline since the recession ended more than three years [emphasis added],” Reuters notes.
From the Huffington Post comes this front page:
For its part, the White House says the downturn is because of — wait for it — Hurricane Sandy, because apparently that’s still an excuse.
“Both international trade flows and inventory accumulation could have been affected by disruptions caused by Hurricane Sandy, although a precise estimate of the effect of the hurricane on GDP is not available,” said Alan B. Krueger, the Chairman of the Council of Economic Advisers in a statement.
“Nonetheless, the BEA reported that Hurricane Sandy destroyed $44 billion worth of fixed capital, which indicates one of the storm’s significant economic effects,” he adds.
He said spending cuts are also to blame for the decrease.
“A likely explanation for the sharp decline in Federal defense spending is uncertainty concerning the automatic spending cuts that were scheduled to take effect in January, and are currently scheduled to take effect on March 1st,” he said.
“The decline in government spending across all levels reduced real GDP by 1.33 percentage points in the quarter,” he adds.
Final Thought (via AEI’s James Pethokoukis):
As recently as its 2011 econ forecast, WH predicted 4.0% GDP growth in 2012, 4.5% in 2013, 4.2% in 2014.
— James Pethokoukis (@JimPethokoukis) January 30, 2013
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Featured image screen grab. This post has been updated.