US economy shrinks 0.1% Q4 2012

The fourth quarter GDP number is shockingly low. The economy weakened in the fourth quarter, posting a minus 0.1 percent annualized pace, following a third quarter gain of 3.1 percent. The latest GDP number fell far short of the consensus forecast of 1.0 percent. It was the first GDP decline since 2009.

Much of the slowing in growth was largely due to a sharp slowing in inventory investment and a drop in government purchases. Demand figures were not quite as weak as overall GDP but still sluggish. Final sales of domestic product rose 1.1 percent, following an increase of 2.4 percent in the third quarter. Final sales to domestic producers (which exclude net exports) posted a modest 1.3 percent gain after rising 1.9 percent the quarter before.

By components, positive contributions came from personal consumption, nonresidential investment (the equipment & software component), and residential investment. PCEs growth actually improved to an annualized 2.2 percent, following a 1.6 percent rise in the third quarter.

Weakness was led by the government component. Government purchases fell an annualized 6.6 percent after a 3.9 percent rise in the third quarter. Next, the inventory change component grew at one-third the pace in the prior quarter. The government component cut GDP growth by 1.33 percentage points while inventories reduced GDP growth by 1.27 percentage points. Net exports were a modest negative.

Headline inflation for the GDP price index showed a 0.6 percent annualized inflation rate versus 2.7 percent in the third quarter. When excluding food and energy, inflation pressure came in at 1.1 percent, compared 1.3 percent the prior quarter.

The latest numbers clearly are disappointing. But final sales were modestly stronger and the latest monthly data are more positive overall. Equity futures eased on the news.

Sal wrote:Austerity!

Today’s report showed household consumption climbed at a 2.2 percent rate, following a 1.6 percent advance from July through September and compared with the 2.1 percent median forecast in the Bloomberg survey. Purchases added 1.5 percentage points to growth.

Corporate spending on equipment and software climbed at a 12.4 percent pace, contributing 0.86 percentage point to growth. It had declined at a 2.6 percent rate in the previous quarter, the most in more than three years.

Residential construction increased at a 15.3 percent rate. For all of 2012, homebuilding climbed 11.9 percent, the most since 1992.

boards of FL wrote:Doesn't seem to be affecting the markets at the moment.

nochain wrote:"WASHINGTON (MarketWatch) -- A gauge of consumer confidence dropped in January to the lowest level since November 2011 on lower expectations and gloomier views of the present situation, according to data released Tuesday. The Conference Board said its consumer-confidence index dropped to 58.6 in January, missing analysts' estimates of 64.3, from an upwardly revised 66.7 in December. A prior December estimate pegged the level at 65.1. "Consumers are more pessimistic about the economic outlook and, in particular, their financial situation," said Lynn Franco, economic indicators director at the Conference Board. "The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock." Generally when the economy is growing at a good clip, confidence readings are at least 90. The Conference Board's barometer of consumers' expectations fell to 59.5 in January from 68.1 in December. The expectations gauge has dropped 30% in the last few months, with protracted fiscal negotiations among U.S. lawmakers taking a toll, among other factors. Meanwhile, the Conference Board's gauge of views on the present situation dropped to 57.3 in January from 64.6 December."

newswatcher wrote:Another quote: "We are now Europe"....And this is a product of the last four years and the confidence that we are heading in the right direction?

boards of FL wrote:

newswatcher wrote:Another quote: "We are now Europe"....And this is a product of the last four years and the confidence that we are heading in the right direction?

Well, you tell me. Here is the historical consumer confidence (the thing that you are responding to in nochain's post). Can you tell from the picture if we are heading in the right direction over the last four years or not?

newswatcher wrote:this is truly reflective on whether the policies of the current administration are moving in the right direction...

boards of FL wrote:

Sal wrote:Austerity!

I expect republicans to hold on for the full sequestration so that we can officially dub this a recession.

boards of FL wrote:

Sal wrote:Austerity!

I expect republicans to hold on for the full sequestration so that we can officially dub this a recession.

Damaged Eagle wrote:

boards of FL wrote:

Sal wrote:Austerity!

I expect republicans to hold on for the full sequestration so that we can officially dub this a recession.

With the way the bureaucrats finagle the books to make things look the way they'd like what makes you think we ever came out of the recession?

*****SMILE*****

https://www.youtube.com/watch?v=SXx2VVSWDMo

boards of FL wrote:http://mam.econoday.com/byshoweventfull.asp?fid=456052&cust=mam&year=2013&lid=0&prev=/byweek.asp#top

The fourth quarter GDP number is shockingly low. The economy weakened in the fourth quarter, posting a minus 0.1 percent annualized pace, following a third quarter gain of 3.1 percent. The latest GDP number fell far short of the consensus forecast of 1.0 percent. It was the first GDP decline since 2009.

Much of the slowing in growth was largely due to a sharp slowing in inventory investment and a drop in government purchases. Demand figures were not quite as weak as overall GDP but still sluggish. Final sales of domestic product rose 1.1 percent, following an increase of 2.4 percent in the third quarter. Final sales to domestic producers (which exclude net exports) posted a modest 1.3 percent gain after rising 1.9 percent the quarter before.

By components, positive contributions came from personal consumption, nonresidential investment (the equipment & software component), and residential investment. PCEs growth actually improved to an annualized 2.2 percent, following a 1.6 percent rise in the third quarter.

Weakness was led by the government component. Government purchases fell an annualized 6.6 percent after a 3.9 percent rise in the third quarter. Next, the inventory change component grew at one-third the pace in the prior quarter. The government component cut GDP growth by 1.33 percentage points while inventories reduced GDP growth by 1.27 percentage points. Net exports were a modest negative.

Headline inflation for the GDP price index showed a 0.6 percent annualized inflation rate versus 2.7 percent in the third quarter. When excluding food and energy, inflation pressure came in at 1.1 percent, compared 1.3 percent the prior quarter.

The latest numbers clearly are disappointing. But final sales were modestly stronger and the latest monthly data are more positive overall. Equity futures eased on the news.

PACEDOG#1 wrote:If Congress and the WH doesn't get THEIR act together, there will be even more of a drop next quarter. Why? THERE will be even less government spending, especially on the military side of the house as the year progresses and another NON BUDGET creating year goes into affect with seemingly endless "continuing resolutions."

boards of FL wrote:

PACEDOG#1 wrote:If Congress and the WH doesn't get THEIR act together, there will be even more of a drop next quarter. Why? THERE will be even less government spending, especially on the military side of the house as the year progresses and another NON BUDGET creating year goes into affect with seemingly endless "continuing resolutions."

House republicans have already guaranteed sequestration will happen. The only thing they are willing to discuss is what specifically will be cut.

boards of FL wrote:Doesn't seem to be affecting the markets at the moment.