The economy in the U.S. unexpectedly came to a standstill in the fourth quarter as the biggest plunge in defense spending in 40 years swamped gains for consumers and businesses.
Gross domestic product dropped at a 0.1 percent annual rate, weaker than any economist forecast in a Bloomberg survey and the worst performance since the second quarter of 2009, when the world’s largest economy was still in the recession, Commerce Department figures showed today in Washington. A decline in government outlays and a smaller gain in stockpiles subtracted a combined 2.6 percentage points from growth.
Rising auto sales led the advance in consumer spending last quarter as a drop in fuel prices and the largest income gain in four years enabled the biggest part of the economy to overcome superstorm Sandy and Washington budget battles. Little inflation and a stop-and-go expansion are why Federal Reserve policy makers, who wrapped up a two-day meeting today, pressed on with plans to pump more money into financial markets.
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