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Economy Shrinks in Q4

Worst part for the White House?  This was sup­posed to hap­pen in the 1st Quar­ter accord­ing to their script.

Then they could have blamed it on the GOP House and the fis­cal cliff.  This way, it’s all on Obama.

The U.S. econ­omy unex­pect­edly con­tracted by 0.1 per­cent in the fourth quar­ter, the first set­back in eco­nomic growth since the mid­dle of 2009.

The down­turn will inevitably fac­tor into the ongo­ing bud­get war in Wash­ing­ton. Con­gress and the White House are wran­gling over what to do with a round of spend­ing cuts set to take place on March 1 — and a pos­si­ble gov­ern­ment shut­down in late March — that some econ­o­mists have warned could fur­ther slow eco­nomic growth.

Ana­lysts had expected GDP growth to be 1 per­cent to 1.2 per­cent, but the advance fourth quar­ter esti­mate from the Com­merce Department’s Bureau of Eco­nomic Analy­sis on Wednes­day painted a dif­fer­ent picture.

The down­turn, accord­ing to the BEA, reflected lower pri­vate inven­tory invest­ment, reduced gov­ern­ment spend­ing at both the fed­eral and the state and local lev­els, as well as decreased exports.

Reduced gov­ern­ment spend­ing” is a bogus claim.  Fed­eral spend­ing was up $31 Bil­lion in Q4 2012 com­pared to Q4 2011.   Unless the C+I+G+(X-M) for­mula has changed since I last took a macro­eco­nom­ics course…

No, what hap­pened in Q4 will likely be explored in the com­ing days and weeks. The likely answer: In antic­i­pa­tion of higher taxes from either Oba­maCare, the tax deal or both, com­pa­nies and indi­vid­ual con­sumers just stopped spending.

Or have the sto­ries about a piss-poor Christ­mas shop­ping sea­son not come out yet?  Per­haps the fact that while Ama­zon had sales jump 22 per­cent, at the same time prof­its shrink­ing 45 per­cent is a por­tent of things to come?

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