RegionsNorth AmericaUS Economy Ends 2012 in Reverse Gear

US Economy Ends 2012 in Reverse Gear

The US economy unexpectedly suffered a slight contraction in the final quarter of 2012, upsetting forecasts of continued growth and marking the first decline since the country moved out of recession in the second half of 2009. Speculation as to the causes include uncertainty caused by the so-called US ‘fiscal cliff’ of potential tax hikes and spending cuts that loomed at the end of last year.

Gross domestic product (GDP) dipped by 0.1% in Q412 against expectations for a 1.1% increase, largely reflecting a sharp cutback in business inventories and also government spending. The latter declined by 6.6%, which included a 22.2% drop in federal defence spending. Both shaved an estimated 1.3 percentage points off growth, suggesting that the underlying US economy continued to show modest, but consistent growth of 1% to 2%. 

A 5.7% drop in US exports also contributed to the Q4 figure, which contrasted with GDP growth of 3.1% in Q312 and brought the overall rate for 2012 to 2.2%; still an improvement on the 1.8% growth rate for 2011.

The economy also had to contend in Q412 with the effects of hurricane Sandy, which struck the east coast of the US in late October and was estimated to have knocked a further 0.5 percentage point off growth. Uncertainty over the impending fiscal cliff at the end of 2012, which may have dented business and consumer confidence, although data also indicated a strengthening in consumer spending and a rebound in business investment by an annualised 8.4%.

The US Federal Reserve announced last month that short-term interest rates will be maintained at close to zero until the country’s unemployment rate, currently 7.8%, falls to 6.5% or below.

Related Articles

India-US trade corridor: Accelerating growth with reverse factoring

Deals & Markets India-US trade corridor: Accelerating growth with reverse factoring

3m Vinod Parmar
Treasury TV: Yeng Butler compares US and European MMF reforms

Compliance Treasury TV: Yeng Butler compares US and European MMF reforms

4m Victoria Beckett
Money market reforms: Navigating LVNAV, CNAV and VNAV

EEA Money market reforms: Navigating LVNAV, CNAV and VNAV

5m Victoria Beckett
Cash repatriation: The bar is now set

Cash Management Cash repatriation: The bar is now set

5m Bob Stark
New accounting standards may bring treasury losses: S&P interview

Accounting New accounting standards may bring treasury losses: S&P interview

7m Victoria Beckett
AFP interview: Treasurers prepare for US interest rate hike with synthetic euro debt

Economy AFP interview: Treasurers prepare for US interest rate hike with synthetic euro debt

8m Victoria Beckett
AFP Day 1: Rising interest rates and blockchain use cases

Banking AFP Day 1: Rising interest rates and blockchain use cases

8m Victoria Beckett
TreasuryXpress Receives Major Growth Investment

EEA TreasuryXpress Receives Major Growth Investment

8m Guest Writer