US growth stalls but recessionary fears dampened

By SCOTT REID
Published on 31/01/2013 00:00

Analysts yesterday played down the prospect of the world’s biggest economy heading back into recession.

An initial forecast showed the United States’ economy unexpectedly shrank in the fourth quarter, suffering its first decline since the recession ended more than three years ago.

The annualised decline of 0.1 per cent followed strong growth of 3.1 per cent in the previous quarter.

Analysts on Wall Street had been expecting a positive reading for the closing months of 2012, but were quick to play down the significance of the negative outcome.

A pick-up in consumer spending and a rebound in business investment curbed the slide in output and offered some hope for the economic recovery, which will be severely tested as Washington tightens its belt.

Tim Ohlenburg, senior economist at the Centre for Economics & Business Research in London, said: “Although surprisingly weak, the fall in output is a manageable setback that should be seen in the context of the third quarter’s strong growth.

“Looking ahead to 2013, there is some ground for optimism. For one, apparent recovery in the housing market is a positive.”

Nigel Gault, chief US economist at IHS Global Insight in Massachusetts, added: “You’ve got a combination of inventories and defence, which are taking more than 2 percentage points off the growth rate. This is not an indicator of recession.”

Growth for 2012 as a whole came in at 2.2 per cent, above the 1.8 per cent average annual rate since 2000.