Gross domestic product (GDP) during the fourth quarter fell like a rock as businesses and investors pulled back in anticipation of the then looming fiscal cliff.
GDP actually shrank for the first time in three years, declining by .1% during the last three months of the 2012.
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Third quarter GDP was up 3.1%. The fourth quarter drop still enabled the year to pull off a 2.2% increase, bettering 2011’s economic performance of up 1.8%.
Payroll tax increases and continued concerns about the budget will likely eat into this year’s growth, as well.
And the fall in GDP doesn’t negate strong areas of economic improvement including the housing market and consumer spending.
Personal consumption increased 2.2% in quarter four over a 1.6% increase in quarter three.
It is also likely that Superstorm Sandy had an impact on fourth-quarter growth. The Commerce Department said the storm destroyed $35.8 billion in private assets and $8.6 billion in government property.
Fed officials have said they will continue to implement the Fed’s monthly bond-buying program until the unemployment rate hits 6.5%.
On the jobs front, the ADP (Automatic Data Processing) report showed that private sector jobs
increased by 192,000 this month.
The ADP report is published two days before the Bureau of Labor Statistics employment report.