US GDP sees shock contraction in Q4

The US economy shrunk in the final quarter of 2012, raising fresh questions about the strength of its economic recovery.

The first official reading of US GDP revealed GDP dropped by 0.1% in the final quarter of 2012, its first contraction since 2009. The reading confounded economists' expectations of a 1.1% rise on the quarter. Spending on defence fell by the largest amount since 1972, according to the Bureau of Economic Analysis, while a reversal in business inventories knocked 1.3 percentage points off the headline figure. Other figures suggest a greater resilience, with consumption growth still healthy at an annualised rate of 2.2%, leading some to retain their optimism. Capital Economics' chie...