Fourth Quarter GDP Expanded

An increase in business spending boosted the U.S. economy in the fourth quarter of 2012, expanding the GDP by 0.4%.These fixed business investments, which rose 13.2%, dramatically impacted the third quarter expansion rate of 0.1%.Much of this spending was concentrated in the “power and communication infrastructure” according to an article in The Wall Street Journal; Companies such as ITC Holdings Corp. and Verizon Communications Inc. being major contributors to spending. However, this fourth quarter GDP gain was the second weakest reading since the current economic recovery began in 2009, but there are other signs of growth. Federal spending has decreased 14.8% and defense spending 22.1% but the US dollar has made a comeback and low rates incubated by the FED has encouraged spending in the private sector.

The economy has been doing well; seemingly unaffected by the Federal sequester cuts which began this month. Analysts’ are saying how the underlying growth momentum is much better than what is implied by the GDP figure but that remains to be seen.

Evan Chang
Source: The Wall Street Journal

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