Jan 31, 2013

US economy contracts but it’s not all bad news

A new report on the US economy's gross domestic product shows the economy has contracted by 0.1%. But there's no need for investors to worry yet.

Glenn Dyer — <em>Crikey</em> business and media commentator

Glenn Dyer

Crikey business and media commentator

Don’t be alarmed at the news that the US economy contracted by a surprise 0.1%, according to the first estimate of fourth quarter gross domestic product. The American economy isn’t heading for another nasty recession, following the UK and other EU economies into the mire.

Other underlying data shows the US economy remains solid. Look at the US Federal Reserve’s stance, which supported that analysis after its first policy making meeting for 2013 overnight. Both consumer spending and business investment remained solid in the quarter, as did housing, which will emerge as the major driver of growth later in the year. However, falling inflation may become a concern.

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