The fiscal cliff effect? Shock fall in US GDP blamed on spending cuts
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Wednesday 30 January 2013
A drop-off in government spending, along with a reduction in business inventories, led to an unexpected contraction in the US economy at the end of last year.
Gross domestic product declined by 0.1 per cent in the three months to December, the worst result since the second quarter of 2009.
Behind the pull-back was a hefty fall in business inventories, as companies put off replenishing their warehouses, and government (chiefly defence) spending. Both factors are expected to ease in the current quarter, something which gave heart to economists, who had expected an expansion in output of 1.1 per cent.
Weighing against this is the challenge posed by the hundreds of billions of dollars in spending cuts that had been put off at the start of the year, and which are now due to hit the economy in March.
The GDP figures did not trigger much of a fall on the markets as investors reasoned that the weak backdrop would stop the Federal Reserve from rolling back the special measures put in place to support the economy.
Later in the day the Fed said it was making no changes in interest rates or its bond buying programme.
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 4 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
- 5 UK weather: 'Coldest night of the year' tonight as freezing temperatures plummet to -10C
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations
Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
AirAsia flight QZ8501 missing: Search for plane carrying 162 passengers from Indonesia to Singapore suspended overnight
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Immigrants make UK racist, says Ukip councillor Trevor Shonk
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...