Last Update: 30-Jan-13 08:48 ET
GDP Goes Negative as Inventories and Government Spending Contract
Economic activity contracted for the first time since Q2 2009 as GDP fell 0.1% in Q4 2012. The Briefing.com consensus expected GDP to increase 1.0%. The headline decline looks worse than it actually is. Excluding inventories -- which subtracted 1.3 percentage points from GDP -- real final sales increased 1.1%. Furthermore, government spending dropped 6.6% led by a 15.0% decline in federal government spending. That lowered GDP by 1.33 percentage points. Key sectors, like consumption (+2.2% in Q4 vs. 1.6% in Q3) and fixed investment (9.7% vs. 0.9%), saw notable acceleration in the fourth quarter. These sectors will need to continue to outperform in order for economic growth to turn positive in 2013 as the sequestration culls government spending all year. Residential investment increased 15.3% in the fourth quarter after increasing 13.5% in Q3 2012. Nonresidential construction spending declined 1.1%. The trade deficit increased from $395.2 bln to $404.0 bln. That reduced GDP by 0.25 percentage points.
Economic activity contracted for the first time since Q2 2009 as GDP fell 0.1% in Q4 2012. The Briefing.com consensus expected GDP to increase 1.0%.