WASHINGTON — The U.S. economy barely grew late last year, thanks largely to a plunge in federal defense spending that in part was likely preparation for the budget cuts under “sequestration.”
The nation’s gross domestic product, or the total value of all goods and services produced, rose by a measly 0.1 percent annual rate in the fourth quarter, according to the Commerce Department’s latest calculations, released Thursday. The government’s initial estimate said inflation-adjusted GDP shrank 0.1 percent in the final three months of last year.
Analysts on average were expecting the quarterly GDP growth rate to be brought up to about 0.5 percent. GDP grew by 3.1 percent annualized in the third quarter of last year.
Still, economists did seem troubled by the modest revision, noting the unusually steep 22 percent annualized fall in defense spending in the fourth quarter. The stagnant GDP rate also reflected a big slowdown in business inventories, suggesting that companies may produce more in coming months to stock up on goods that have been run down.
Also belying the overall poor GDP growth were strong numbers for business investments, particularly residential investment, which jumped 17.5 percent at an annual rate. Private spending also increased by a decent 2.1 percent, slightly better than the third quarter.
Jobless claims fall
First-time jobless claims dropped more than expected last week to 344,000 and the number of people collecting unemployment benefits fell to its lowest level since mid-2008, the Labor Department said Thursday.
Initial claims for unemployment insurance were down 22,000 for the week ending Saturday, compared to the previous week.
Analysts had expected claims to drop only slightly, to 360,000, last week.
— Los Angeles Times