The US took one of only two steps required to
go into recession as the economy shrunk by 0.1% in Q4 of 2012. Growth for 2012
as a whole came in at 2.2%, up from 1.8% in 2011, but still unusually slow
compared with previous economic recoveries in the US following recessions in
the post-War era.
Remember,
the US is a big deal to us (as I wrote in a previous post) http://stevesmithlive.blogspot.co.uk/2012/11/obama-re-elected-president-of-uk.html
The fourth-quarter shrinkage in economic output comes as a shock to
analysts on Wall Street, who had been expecting 1.1% growth (according to a
poll by Reuters). Interestingly……not one economic expert surveyed had predicted
an economic contraction. Your guess on the US economy would have been as
valuable as theirs clearly!
Perhaps the most interesting point was that
growth was dragged down by a 22% cut in the federal government's defence
spending. Or to put this another way, so many businesses / personal prosperity
is linked to war in the US. To put this into perspective, this was the biggest
defence spending cut since 1972, when the US was winding down from the end of
the Vietnam War.
Spending on war / defence has been a
reoccurring theme for the past 50 years in the US. At one extreme, you have
George W Bush who won two elections by being devoted to war (and oil)……to the
other extreme you have John F Kennedy who probably lost his life in 1963 due to
an anti-war stance.
One thing for sure, a reduction in defence
spending will hit the US economy……another issue to add on top of other public
spending cuts and tax rises.
Interesting times……
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