US economy shrinks 0.1 pct., first time in 3 1/2 years; deep cut in defence spending key factor | iNFOnews

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US economy shrinks 0.1 pct., first time in 3 1/2 years; deep cut in defence spending key factor

FILE - In this Wednesday, Dec. 5, 2012, file photo, containers are unloaded from cargo ships at APM Terninals in the Port of Los Angeles. The U.S. economy unexpectedly shrank from October through December, the first quarterly drop since 2009 and a reminder of the economy's vulnerability as automatic cuts in government spending loom. (AP Photo/Nick Ut, File)
January 30, 2013 - 5:33 AM

WASHINGTON - The U.S. economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defence spending in 40 years, fewer exports and sluggish growth in company stockpiles.

The Commerce Department says the economy contracted at an annual rate of 0.1 per cent in the fourth quarter. That's a sharp slowdown from the 3.1 per cent growth rate in the July-September quarter.

The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.

Still, the weakness may be because of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth. Both are volatile. And they offset faster growth in consumer spending, business investment and housing.

News from © The Associated Press, 2013
The Associated Press

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