U.S. economy shifted into reverse in late 2012
BY AP Wire Service
Thursday, January 31, 2013
1/31/13 at 5:44 AM
WASHINGTON - The U.S. economy shrank unexpectedly late last year, a reminder of the biggest threat it faces in 2013: sharp government spending cuts and prolonged budget fights.
A plunge in defense spending helped push the economy into negative territory for the first time since mid-2009. The fourth-quarter contraction came in at an annual rate of 0.1 percent, according to a government estimate released Wednesday.
The likelihood of another recession appears remote. The economy is forecast to grow around 2 percent this year as areas like housing and auto sales strengthen. Investors appear unfazed, too: The stock market has surged more than 6 percent this year.
But economists warn that further spending cuts would weaken a still-precarious recovery.
Deep spending cuts in defense and domestic programs are set to kick in March 1. Most of the federal government could shut down March 27 if Congress doesn't extend a temporary measure authorizing funding. And the nation's borrowing limit must be raised by May 18 or the government could default on its debts.
For all of 2012, the economy expanded 2.2 percent.