Breathe a tiny sigh of relief, if not contentment: the American economy grew a tiny bit in the last quarter of 2012.
Output expanded at an annual rate of just 0.1 percent, below the country’s long-term average, not to mention way below the growth needed to get unemployment back to normal. But at least the economy did not shrink, as the Commerce Department had originally estimated last month.
The department’s latest estimate for economic output, released Thursday, showed that growth was depressed by declines in military spending (possibly in anticipation of the across-the-board spending cuts set to begin Friday) and the amount that companies restored their stockroom shelves.
The output growth number was revised upward from the original estimate partly thanks to updated, and better, figures on net trade and nonresidential fixed investment.
Economists expect that government spending will continue to drag on the economy this year, especially if Congress does not avert the spending cuts, which would shave around 0.6 percentage point off growth. They also expect though, that the private sector will offset most of this drag, thanks to the housing recovery and other sources of strength. Forecasts for the first quarter are for annual growth around 2.4 percent to 3 percent.
Monetary stimulus from the Federal Reserve, while under fire from some Republicans, is also helping offset the fiscal contraction.
“With monetary policy working with a lag and still being eased, the boost to the economy is probably still growing,” said Jim O’Sullivan, chief United States economist at High Frequency Economics.
U.S. Economy Barely Grew in Fourth Quarter, Revision Shows
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