Economy contracted at 0.1 percent pace during the fourth quarter of 2012

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The U.S. economy contracted during the fourth quarter of 2012 as gross domestic product (GDP) decreased 0.1 percent, according to The Washington Post.

The fourth-quarter figure is down compared with the second quarter, when GDP increased 3.1 percent. The drop occurred despite strong consumer spending and business investment.

Consumer spending increased at an annual rate of 1.5 percent during the fourth quarter, and business investment was up 1.1 percent.

Significant drivers of the GDP decrease included the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles. Business spending on equipment and software increased after shrinking during summer 2012.

Economists said the drop in GDP wasn't as bleak as it seemed. The weakness mainly resulted from one-time factors; government spending cuts and slower inventory growth, which can be volatile, subtracted 2.6 percentage points from the GDP.

During 2012, the economy expanded 2.2 percent, which is better than the 1.8 percent growth in 2011.

2/1/2013

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