Economy shrinks 0.1% in Q4

(MoneyWatch) The nation's gross domestic product -- the value of all goods and services produced -- fell at an annual rate of 0.1 percent in the fourth quarter, a big downshift from 3.1 percent in the third quarter. During the quarter federal spending plummeted by 15 percent, led lower by the biggest cut in defense spending in 40 years. The reduction in government spending, along with a pullback in private business inventories, reduced growth by 2.6 percent over the quarter.

There were some small positives within the report: Consumer spending increased by 2.2 percent, up from 1.6 percent in the third quarter and business spending was up 8.4 percent after declining in the previous quarter. Growth for all of 2012 was 2.2 percent, ahead of 2011's growth of 1.8 percent.

Economists had predicted a weakened pace, but few thought the economy would actually shrink after 13 consecutive quarters of growth. Because this is the first of three readings on the quarter, the number is subject to revisions, so maybe there will be an improvement. Still, there's no getting around the fact that the U.S. is still mired in a slow growth recovery. According to the Wall Street Journal, the real rate of economic growth during the recovery has averaged about 2.2 percent, which is about half the 4.23 percent average rate in the past 10 recoveries and well below the average annualized GDP since World War II of 3 - 3.5 percent.

Perhaps more worrisome is what lies ahead. The 15 percent reduction in government spending may be a mere pittance when compared to the $110 billion of across-the-board spending cuts ("sequestration") that are set to begin on March 1. According to Macroeconomic Advisors, the sequester could shave 0.7 percent points from 2013 GDP.

Those spending cuts come on top of the 0.5 percent reduction of growth caused by the recent payroll tax increase. Capital Economics attributed the recent drop in the Conference Board's Consumer Confidence index to a 14-month low to the payroll tax increase and predicts that "household income is likely to restrain first-quarter consumption growth." As a result of both the payroll tax increase and spending cuts, most economists have downgraded growth expectations for the year.

It's instructive to note that the coming debate about the nation's debt and deficit severely impact prospects for future growth. Before deficit hawks extol the virtues of a country living within its means, it may be wise to look at Spain's most recent report on economic growth. The preliminary reading of Spanish GDP fell 0.7 percent in the fourth quarter from the third quarter and 1.8 percent from the same period the previous year, as new rounds of eurozone imposed austerity depressed the economy. Is the U.S. ready to trade debt reduction for economic growth?

Editor's note: CBS MoneyWatch initially published an Associated Press story on the GDP report, which we have since replaced with this staff-written article. You can find the initial AP report and reader comments here.

[outback_jackson]

Economy shrinks 0.1% in Q4

"(MoneyWatch) The nation's gross domestic product -- the value of all goods and services produced -- fell at an annual rate of 0.1 percent in the fourth quarter, a big downshift from 3.1 percent in the third quarter. During the quarter federal spending plummeted by 15 percent, led lower by the biggest cut in defense spending in 40 years".



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MONKEE replies: "It's FOX new's fault.....If they didn't report it, then we wouldn't know".
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LOL! Seems that MoneyWatch here at CBS did a fine job of reporting this 0.1% of GDP downturn in Q4, without your faux nooz bozos!

If you notice, it also mentions that "federal spending plummeted by 15 percent, led lower by the biggest cut in defense spending in 40 years," that led to the reduction in growth by 2.6 percent over the quarter.

Let's listen to the GOP and drastically cut spending, and we're sure to see a 2013 recession!

[outback_jackson]

ANTIGLOBAL13 says: "well folks this means we are officially in a recession again".



Nah.....one quarter of a slight downturn means nothing!

In a 1975 New York Times article, economic statistician Julius Shiskin suggested several rules of thumb for defining a recession, one of which was "two down consecutive quarters of GDP".

Although some economists prefer a definition of a 1.5% rise in unemployment within 12 months.

[outback_jackson]

Economists and politicians can make all kinds of guesses as to why our economy faltered the last quarter in 2012, but obviously, Superstorm Sandy that hit such a densely populated part of our country on Oct. 29, had a huge impact on our economy, and still does, since it took the republican House 3 months to pass emergency aid.

I just hope that the N.E. congresscritters remember how long it took, and who still voted against emergency aid to Sandy victims when the next hurricane or tornadoes hit the RED welfare states!

[MiamiRealEstateKing]

Is there no way to coordinate stories? These two seem to contradict each other instead (see: http://www.cbsnews.com/8301-505123_162-57566675/economy-hits-pothole-but-likely-to-avoid-ditch/)

[zmonkee]

either way....we're effed!!

[Ewiak]

Where are we going? An ancient vision says: "And [the king of the north] will go back (to) his land with great wealth [1945]; and his heart (will be) against the holy covenant [state atheism]; and will act [it means activity in the international arena]; and turned back to his own land [1991-1993. The collapse of the Soviet Union and the Warsaw Pact. Russian troops returned to their country]. At the appointed time [he] will return back." (Daniel 11:28, 29a, literal translation) The return of Russia in this context means crisis, which will eclipse the Great Depression. Not only the eurozone will break up, but also the European Union and NATO. Then many countries of the former Eastern block will return to Russia's zone of influence. Russian troops will be stationed here again.

This will be the last sign before the global nuclear war. (Daniel 11:29b, 30a; Numbers 24:23, 24; Matthew 24:7; Revelation 6:4)

All the details of this vision are being fulfilled from the time of ancient Persia, in chronological order. It is true that this vision is variously interpreted. As one can see, it has a lot of details. Therefore the insightful person is able to detect any error or sophistry. (Daniel 12:10)

In 1882 British troops occupied Egypt. Great Britain then took the role of "the king of the south". Around the same time, Russia expanded its influence in the region, which previously belonged to Seleucus I Nicator, and took the role of "the king of the north". (Daniel 11:27)

[rickcham]

The Blamer-in-chief spent 1.6 million dollars just yesterday flying to Vegas to tell us NOTHING. Hope all of the idiots who voted for this clown are happy.

[wfw3536]

Funny, before the election Obama said the economy has turned the corner and the national media were right behind him with all of those wonderful stories about how great things were in our country. The media even had business folks and individuals signing the praises of Obama. Now we find out the reason for the downturn in the GDP and economy is a lack of government spending along with other reasons. So where are all of these expert economist who CBS and other medias along with Obama sighted about how the economy was doing so great. This should be the lead story, but will soon be buried.

[zmonkee]

It's FOX new's fault for reporting how bad the economy is-- If they didn't report it, then we wouldn't know....and all would be well in oboland-

[edecker1969]

Obama lied and the economy died.

[aftinc]

Let's not take a knee jerk reaction but step back and honestly look at whats happening. We all know that the amount of money the government has spent over and above the revenues during the last 8 - 10 years has to come to an end and we'll need to pay that back. The extremes from both sides want us all to believe that their plan had nothing to do with this but the fact remains, they all are involved the leftys and the rightys and we (the working class), as is always the case are left to pay the bill. The sooner the public comes to the middle and we vote "representatives" into office the sooner things will get better. If we keep voting for the righty's and the lefty's then the longer the economy will stay in the tank. Sorry if I've busted anyone's balloon!!!

[Gecko5]

Economy shrinks primarily as a result of cuts in defense spendng I would think that conservatives and especially Tea Party supporters would find this to be good news. The consequence of reduced government spending is: reduce numbers of Government employees and contractors (Now those people don't pay taxes but they do collect unemployment insurance or start collecting on their government pensions or those that can. Reduced contracts mean companies reduce employees: again less taxes colected but those former employees again collect unemployment insurance while their former employers pay less in income taxes based upon reduced income from the government.

[jgg000010]

you'd be hard-pressed to find anybody, including conservatives and tea party supporters, who thinks this is good news.

[easymoola]

Ms Pelosi says that unemployment benefits are extremely stimulating to the economy [yea right]. Crony capitalism which is what we have witnessed for too far long, especially these past several years will and apparently is catching up to all of us. When you see Barnes and Nobel downsizing, consumer confidence down, amazon failing to make money,and companies that won't hire full time employees due to the new healthcare debackle then it won't get any better. No, none of us take any delight to see a generation of people having to depend on Government handouts just to live, let alone get ahead.