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GDP Shows Surprise Drop for US in Fourth Quarter

Posted by on Jan. 30, 2013 at 5:09 PM
  • 8 Replies

 

The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.

The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.

The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.

Still, the weakness may be because of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.

And those volatile categories offset faster growth in consumer spending, business investment and housing -- the economy's core drivers of growth.

Another positive aspect of the report: For all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.

The economy may stay weak at the start of the year because Americans are coming to grips with an increase in Social Security taxes that has left them with less take-home pay.

Subpar growth has held back hiring. The economy has created about 150,000 jobs a month, on average, for the past two years. That's barely enough to reduce the unemployment rate, which has been 7.8 percent for the past two months.

Economists forecast that unemployment stayed at the still-high rate again this month. The government releases the January jobs report Friday.

The slower growth in stockpiles comes after a big jump in the third quarter. Companies frequently cut back on inventories if they anticipate a slowdown in sales. Slower inventory growth means factories likely produced less.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced its inventories by $2 billion in the fourth quarter as global sales declined from a year earlier.

The biggest question going forward is how consumers react to the expiration of a Social Security tax cut. Congress and the White House allowed the temporary tax cut to expire in January, but reached a deal to keep income taxes from rising on most Americans.

The tax increase will lower take home pay this year by about 2 percent. That means a household earning $50,000 a year will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.

Already, a key measure of consumer confidence plummeted this month after Americans noticed the reduction in their paychecks, the Conference Board reported Tuesday.

Economists expected the first reading on gross domestic product to show growth of 1 percent, down from the third quarter's reading of 3.1 percent.

(AP)

by on Jan. 30, 2013 at 5:09 PM
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Replies (1-8):
Anonymous
by Anonymous on Jan. 30, 2013 at 5:14 PM
1 mom liked this
No big shocker. Obama paints this good picture which is not true. Things are not better.
Ednarooni160
by on Jan. 30, 2013 at 5:20 PM
2 moms liked this

The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced its inventories by $2 billion in the fourth quarter as global sales declined from a year earlier.

The tax increase will lower take home pay this year by about 2 percent. That means a household earning $50,000 a year will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!

Anonymous
by Anonymous on Jan. 30, 2013 at 5:35 PM
1 mom liked this
It was not a true tax increase. Social security, which is nearly broke, was lowered 2% for 2 years, so it is back to where it was. The decrease should have never happened in the first place really.


Quoting Ednarooni160:

The surprise contraction could raise fears about the economy's ability
to handle tax increases that took effect in January and looming spending
cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced
its inventories by $2 billion in the fourth quarter as global sales
declined from a year earlier.

The tax increase
will lower take home pay this year by about 2 percent. That means a
household earning $50,000 a year will have about $1,000 less to spend. A
household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!


Ednarooni160
by on Jan. 30, 2013 at 5:42 PM



Quoting Anonymous:

It was not a true tax increase. Social security, which is nearly broke, was lowered 2% for 2 years, so it is back to where it was. The decrease should have never happened in the first place really.


Quoting Ednarooni160:

The surprise contraction could raise fears about the economy's ability
to handle tax increases that took effect in January and looming spending
cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced
its inventories by $2 billion in the fourth quarter as global sales
declined from a year earlier.

The tax increase
will lower take home pay this year by about 2 percent. That means a
household earning $50,000 a year will have about $1,000 less to spend. A
household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!


Thanks for the info..I heard that..  In this economy..I would think the president would want to DO whatever necessary to make it easier for workers and for businesses to hire people..  A president (imo) should encourage jobs and businesses.. A $1,000 to some is food off the table..insurance.., gas...medicine..etc.... And he wants to "fine" people who can't afford insurance?  There's so many other things that could be cut instead of paychecks..(imo)..


Anonymous
by Anonymous on Jan. 30, 2013 at 5:48 PM
Wanna cut people off SSI and social security? That is what needs to happen to still have that 2% cut. I know SS won't be there for me. Anyone young needs to realize that too.


Quoting Ednarooni160:




Quoting Anonymous:

It was not a true tax increase. Social security, which is nearly broke, was lowered 2% for 2 years, so it is back to where it was. The decrease should have never happened in the first place really.





Quoting Ednarooni160:

The surprise contraction could raise fears about the economy's ability

to handle tax increases that took effect in January and looming spending

cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced

its inventories by $2 billion in the fourth quarter as global sales

declined from a year earlier.

The tax increase

will lower take home pay this year by about 2 percent. That means a

household earning $50,000 a year will have about $1,000 less to spend. A

household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!



Thanks for the info..I heard that..  In this economy..I would think the president would want to DO whatever necessary to make it easier for workers and for businesses to hire people..  A president (imo) should encourage jobs and businesses.. A $1,000 to some is food off the table..insurance.., gas...medicine..etc.... And he wants to "fine" people who can't afford insurance?  There's so many other things that could be cut instead of paychecks..(imo)..




Ednarooni160
by on Jan. 30, 2013 at 5:56 PM
3 moms liked this



Quoting Anonymous:

Wanna cut people off SSI and social security? That is what needs to happen to still have that 2% cut. I know SS won't be there for me. Anyone young needs to realize that too.


Quoting Ednarooni160:




Quoting Anonymous:

It was not a true tax increase. Social security, which is nearly broke, was lowered 2% for 2 years, so it is back to where it was. The decrease should have never happened in the first place really.





Quoting Ednarooni160:

The surprise contraction could raise fears about the economy's ability

to handle tax increases that took effect in January and looming spending

cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced

its inventories by $2 billion in the fourth quarter as global sales

declined from a year earlier.

The tax increase

will lower take home pay this year by about 2 percent. That means a

household earning $50,000 a year will have about $1,000 less to spend. A

household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!



Thanks for the info..I heard that..  In this economy..I would think the president would want to DO whatever necessary to make it easier for workers and for businesses to hire people..  A president (imo) should encourage jobs and businesses.. A $1,000 to some is food off the table..insurance.., gas...medicine..etc.... And he wants to "fine" people who can't afford insurance?  There's so many other things that could be cut instead of paychecks..(imo)..




Of course I don't..how about we rethink sending monies to other countries.. How about politicians start paying for their own gas and lunches..like "regular" workers do?   There's so many things that could be cut..politicans just don't want to give up the good life and their "agendas"..(imo).


Anonymous
by Anonymous on Jan. 30, 2013 at 6:16 PM
Not gonna happen though.


Quoting Ednarooni160:




Quoting Anonymous:

Wanna cut people off SSI and social security? That is what needs to happen to still have that 2% cut. I know SS won't be there for me. Anyone young needs to realize that too.





Quoting Ednarooni160:





Quoting Anonymous:

It was not a true tax increase. Social security, which is nearly broke, was lowered 2% for 2 years, so it is back to where it was. The decrease should have never happened in the first place really.








Quoting Ednarooni160:

The surprise contraction could raise fears about the economy's ability


to handle tax increases that took effect in January and looming spending


cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced


its inventories by $2 billion in the fourth quarter as global sales


declined from a year earlier.

The tax increase


will lower take home pay this year by about 2 percent. That means a


household earning $50,000 a year will have about $1,000 less to spend. A


household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!




Thanks for the info..I heard that..  In this economy..I would think the president would want to DO whatever necessary to make it easier for workers and for businesses to hire people..  A president (imo) should encourage jobs and businesses.. A $1,000 to some is food off the table..insurance.., gas...medicine..etc.... And he wants to "fine" people who can't afford insurance?  There's so many other things that could be cut instead of paychecks..(imo)..






Of course I don't..how about we rethink sending monies to other countries.. How about politicians start paying for their own gas and lunches..like "regular" workers do?   There's so many things that could be cut..politicans just don't want to give up the good life and their "agendas"..(imo).




Ednarooni160
by on Jan. 30, 2013 at 8:35 PM
1 mom liked this



Quoting Anonymous:

Not gonna happen though.


Quoting Ednarooni160:




Quoting Anonymous:

Wanna cut people off SSI and social security? That is what needs to happen to still have that 2% cut. I know SS won't be there for me. Anyone young needs to realize that too.





Quoting Ednarooni160:





Quoting Anonymous:

It was not a true tax increase. Social security, which is nearly broke, was lowered 2% for 2 years, so it is back to where it was. The decrease should have never happened in the first place really.








Quoting Ednarooni160:

The surprise contraction could raise fears about the economy's ability


to handle tax increases that took effect in January and looming spending


cuts.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced


its inventories by $2 billion in the fourth quarter as global sales


declined from a year earlier.

The tax increase


will lower take home pay this year by about 2 percent. That means a


household earning $50,000 a year will have about $1,000 less to spend. A


household with two high-paid workers will have up to $4,500 less.

In this economy some people can't afford to even have $50.00 less..  Maybe we should all become politicians..they get to be exempt from Obama care and other things..get raises...free gas, trips, lunches all on the taxpayers back.... weeeeee!




Thanks for the info..I heard that..  In this economy..I would think the president would want to DO whatever necessary to make it easier for workers and for businesses to hire people..  A president (imo) should encourage jobs and businesses.. A $1,000 to some is food off the table..insurance.., gas...medicine..etc.... And he wants to "fine" people who can't afford insurance?  There's so many other things that could be cut instead of paychecks..(imo)..






Of course I don't..how about we rethink sending monies to other countries.. How about politicians start paying for their own gas and lunches..like "regular" workers do?   There's so many things that could be cut..politicans just don't want to give up the good life and their "agendas"..(imo).




Not as long as the "same" players stay in the game..maybe it's time to rethink this "party" system..


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