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Early Data Says the Economy Contracted at the End of Last Year. Don't Panic Yet. Early Data Says the Economy Contracted at the End of Last Year. Don't ...

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Economy

Early Data Says the Economy Contracted at the End of Last Year. Don't Panic Yet.

photo of Catherine Hollander
January 30, 2013

The economy unexpectedly contracted in the last three months of 2012, according to early data released by the Commerce Department on Wednesday.

It was a miss for forecasters, who had been expecting growth of 1.1 percent. Instead, the economy contracted by 0.1 percent. GDP had risen 3.1 percent in the third quarter, making the fourth a large decline. Here's a chart showing the percent change in GDP growth each quarter since 2009.

GDP

 

It might not all be so bad, though. "Frankly, this is the best looking contraction in GDP you'll ever see," Paul Ashworth, chief U.S. economist of Capital Economics wrote in a research note. Consumption growth rose by 2.2 percent, up from 1.6 percent in the third quarter, and business investment also climbed by 8.4 percent. "There is nothing in these figures to change our view that US GDP growth will accelerate as this year goes on," he wrote.

Wednesday's news marks only the first read on the Q4 GDP numbers, which will be revised twice more with more complete data. February 28 will give us the next look at how the economy performed during the quarter that contained the presidential election, holiday spending and fiscal cliff talks in Washington.

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