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 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 3 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
King Salman: Just five days in, Saudi Arabia's new king has already overseen a beheading
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Chilling drone footage captures Auschwitz ahead of 70th anniversary of liberation
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...