Q4 GDP: Economy Still Facing Headwinds

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Q4 GDP: Economy Still Facing Headwinds

The U.S. Bureau of Economic Analysis today reported a 0.1 percent decline in annualized growth in real gross domestic product for the fourth quarter of 2012.

The economy ended 2012 on a very sluggish pace, even though one-time factors put the number below the trend. While the inventory runoff and the steep decline in defense spending in the fourth quarter made economic activity look weaker than it really was, the underlying demand from consumers and businesses kept moving forward at a moderate pace. For the first half of 2013, we do not envisage a very strong acceleration in economic growth as the restraining economic forces remain in place, including fiscal policy tightening and ongoing uncertainty. However, there are reasons for hope in the second half of the year as the fiscal drag wanes and housing, which long created a drag on the economy, continues to turn from a headwind to a tailwind. The latest signal from The Conference Board Leading Economic Index for the U.S. suggests these developments might soon be in evidence.




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