As should surprise practically nobody who visits this blog, U. S. GDP shrank in the fourth quarter of 2012:
WASHINGTON—U.S. economic momentum screeched to a halt in the final months of 2012, as businesses pared back inventories and government spending fell sharply, while lawmakers struggled to reach a deal on tax increases and budget cuts.
The nation’s gross domestic product shrank for the first time in three and a half years during the fourth quarter, declining at an annual rate of 0.1% between October and December, the Commerce Department said Wednesday.
It’s the first time the broad measure of all goods and services produced by the economy contracted since the post-financial crisis recovery began. Economists surveyed by Dow Jones Newswires had expected a 1.0% annualized growth.
The economy reversed from a 3.1% pace in the third quarter largely because federal government spending fell by 15% and private business inventories also decreased. Those drags and others were too much for solid consumer spending to overcome.
Consumer spending won’t recover until the process of deleveraging has run its course, which doesn’t look like it will happen any time soon.
I know! We can borrow a lot more to pay for college and grad school!