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US economy shrinks 0.1 percent, 1st time in 3 1/2 years

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent 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.

Read more: http://www.foxnews.com/politics/2013/01/30/us-economy-shrink...
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The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.

What an amazing coincidence! The story breaks the day before the FOMC announces the policy adopted at the current 2 day summit. Here I was, concerned that with all the great economic news: housing starts up, housing prices up, unemployment claims down, etc, that the Fed would look foolish if they said they were staying the course of easy monetary policy. Now, quite coincidentally (I'm sure), they can point to the weaker-than-expected 4Q numbers & the tax hikes effective January 1,2013 and state that they need more time to assess things.

Poz
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With all the drama about the "fiscal cliff" last quarter, and pols putting ideology ahead of a functioning government, it was inevitable that everyone, consumers, private business, and government, would pull in their ears until the level of uncertainty was reduced.

Steve
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US economy shrinks 0.1 percent, 1st time in 3 1/2 years

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent 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.



John Hussman has got to be feeling vindicated; he's been beating this drum for months.
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The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter.

That's a rounding error. Adjustments are made for the previous quarter every quarter. I'll get concerned when they round it down further, otherwise I'll look to housing starts, unemployment figures, stock averages, exports, and all the other metrics that seem to be saying "nope, positive."

John Hussman has got to be feeling vindicated; he's been beating this drum for months.

He's also been predicting runaway inflation for years now, and I'm still waiting. So is everyone else.
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He's also been predicting runaway inflation for years now, and I'm still waiting. So is everyone else.


He's been consistently saying that high inflation was more likely to arrive in the latter part of the decade.
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That's a rounding error. Adjustments are made for the previous quarter every quarter. I'll get concerned when they round it down further, otherwise I'll look to housing starts, unemployment figures, stock averages, exports, and all the other metrics that seem to be saying "nope, positive."

It's a booming economy in NYC, but then that's nothing new. I have noticed a remarkable amount of restaurant rennovations lately. Two just blocks from me in my neighborhood, but all over Brooklyn it seems restaurants are closed to rennovate. Part of that is surely Winter, but it takes some confidence to close your restaurant down entirely for a week or two no matter what the season.


He's also been predicting runaway inflation for years now, and I'm still waiting. So is everyone else.

To be fair, he's been predicting high inflation in "the back half of this decade" pretty consistently, from what I recall of his writings. Yes, for years, but not until the late teens.

whafa, has to walk 25 minutes for his sushi tonight.
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What an amazing coincidence! The story breaks the day before the FOMC announces the policy adopted at the current 2 day summit.

I'm generally OK with conspiracy theories, particularly when they involve our banking and economic management system. But I'm not so sure on this one.

Doesn't the Commerce Department generally announce their economic numbers on a date scheduled well in advance? And isn't that generally on a pretty regular schedule? And doesn't the FOMC meet on a regular schedule as well? And wouldn't it make sense to schedule that FOMC meeting on a date such that the Commerce Department's figures could be immediately incorporated into that meeting?

In short, this doesn't sound as much like conspiracy as it does good planning as far as meeting dates are concerned.

...
...

Wait a minute. Did I just make an argument for the Fed doing some good planning? I think I need to get my head examined.

--Peter
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Wait a minute. Did I just make an argument for the Fed doing some good planning? I think I need to get my head examined.

I don't think it has been suggested that they can't plan well *for themselves*.

It's their ability to plan for our monetary system that is questioned.
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He's also been predicting runaway inflation for years now, and I'm still waiting. So is everyone else

Holding the pontificating Dr Hussman to his predictions is a faux pas over here.
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Here's a chart that shows Defense spending and inventories were down in Q4 and were the major contributors to the drop.

http://www.washingtonpost.com/blogs/wonkblog/files/2013/01/q...

A little background info is in order.

DoD's fiscal year ends in Sept. Following the standard practice for government funded entities, DoD spent like mad before the end of their FY. After all, "A penny saved this year means a penny lost next year."

There was probably some contribution from the impending fiscal cliff, as well. Here's James Hamilton's take, which goes into greater detail. He's not too concerned.

Taking these two factors out, real private demand grew at a 2.5% annual rate during the fourth quarter.

http://www.econbrowser.com/archives/2013/01/gdp_falling_aga....
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