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Article published January 29, 2013

Economy shrinks for first time in 3 years



WASHINGTON — 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.
The Commerce Department said this morning that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That was a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.
Economists said the drop in gross domestic product wasn’t as bleak as it looked. The weakness was mainly the result of one-time factors. Government spending cuts and slower inventory growth, which can be volatile, subtracted a combined 2.6 percentage points from GDP.
But the fact that the economy shrank at all, combined with much lower consumer confidence reported Tuesday, could raise fears about the economy’s durability in 2013. That’s because deep government spending cuts will automatically slash domestic and defense programs starting in March unless Congress reaches a deal to avert them.
And Americans are coming to grips with an increase in Social Security taxes that leaves them with less take-home pay.



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