Thursday, January 31, 2013

GDP Shrinkage

GDP's negative trending
Is not the economy's ending;
We're having a boom
In the stuff we consume,
Offset by less government spending.

It was a shock to read yesterday that the US economy actually shrank by -0.1% in the fourth quarter of 2012, but the markets reacted steadily.  It appears that, beneath the negative headline number, the private economy is actually doing pretty well.  Here's the Washington Post on the breakdown of the numbers (see chart at right):
The GDP report for the fourth quarter of 2012 is, on its face, disappointing. The economy shrunk, at an 0.1 percent annual rate, the first such contraction since the recession’s nadir in 2009. But commentators are surprisingly upbeat about it. Spending and investment are still looking good, but sharp contractions in business inventory and federal defense spending sunk the overall number. Paul Ashworth at Capital Economics called it “The best-looking contraction in U.S. GDP you’ll ever see.”

1 comment:

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