US limping along while the Eurozone screams in pain
by digby
And now a real shock – the US economy shrank in the last three months of 2012.
Annualised GDP* fell by 0.1%, much worse than analyst expectations of a 1.0% rise. This is the first time that US GDP has fallen since the second quarter of 2009.
Dean Baker says it’s not quite as bad as it sounds:
A sharp drop in government spending, heavily concentrated in defense,
coupled with a decline in inventories caused GDP to shrink at a 0.1
percent rate in the 4th quarter. Government spending fell at a 6.6
percent annual rate, driven by a 22.2 percent decline in defense
spending, subtracting 1.33 percentage points from the growth rate in
the quarter. A $40.3 drop in the rate of inventory accumulation
reduced growth by another 1.27 percentage points. Without these
factors, GDP would have growth a 2.5 percent annual rate in the
quarter.Pulling out these extraordinary factors, the GDP data were largely in
line with prior quarters. Consumption grew at a 2.2 percent annual
rate, driven mostly by 13.9 percent growth in durable goods purchases,
primarily cars. This number was inflated due to the effects of Sandy,
which destroyed many cars, forcing people to buy new ones. Growth in
this category will be substantially weaker and possibly negative in
the next quarter. On the other side, housing and utilities subtracted
0.47 percentage points from growth in the quarter. This is likely a
global warming effect with warmer than normal weather leading to less
use of heating in the quarter. (There was a comparable falloff in the
4th quarter of 2011 when we also had unusually warm weather.)
Basically we’re still limping along. So, let’s have some more austerity. It’s working so well. Bring on the sequester!
Oh, and by the way, how’s that austerity campaign working out in Spain?
I can hardly wait to see Paul Ryan’s plan to eliminate the US deficit in 10 years. If he and Mitt were in charge I’d bet we could give Spain a run for its money. Instead we’ll probably just tread water while wages fall and the 1% accumulate more of the nation’s wealth more gradually. I’m pretty sure that’s what we define as a big economic success these days.
.