News / USA

Central Bank Says US Economy 'Paused'

A television screen in a post on the floor of the New York Stock Exchange shows the decision of the Federal Reserve, January 30, 2013.
A television screen in a post on the floor of the New York Stock Exchange shows the decision of the Federal Reserve, January 30, 2013.
VOA News
Top officials of the U.S. central bank say the economy "paused" in recent months.

That is why the Federal Reserve decided to continue an effort to stimulate the economy.  That program involves buying $85 billion worth of bonds a month, and is intended to cut long-term interest rates.  The bank is also keeping short term interest rates at the record-low levels where they have been for some time.

The fed action came the same day a study showed the U.S. economy shrank slightly in the last three months of 2012.  Government experts blamed the slowdown on cuts in government spending, slowing exports, and businesses keeping smaller inventories.

Wednesday's report from the Commerce Department says the economy shrank at a one-tenth of one percent annual rate in the fourth quarter.  That is the worst performance since 2009, during the recession.

The decline is a sharp slowdown from the more than three percent annual growth rate in the prior quarter.  This latest report came as U.S. consumers cope with higher taxes and while Washington is considering further spending cuts. Exports have been hurt by a recession in Europe, which cut demand for U.S.-made goods. 

Growth was also hurt when businesses cut their stockpiles as managers worried they might not be able to sell all of their goods.

An economic expert at Bankrate.com says businesses are likely to face less political uncertainty in January, February, and March, and the economy is poised to resume slow growth.  In an interview with VOA, Greg McBride says with fewer worries, businesses are more likely to stock up on goods to sell, which will give the economy a boost.

The report said overall growth for 2012 was 2.2 percent, a bit better than the prior year.

You May Like

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

China to Open Stock Markets to Pension Funds

In unprecedented move, government to soon allow local pension funds to invest up to $94 billion in domestic shares More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age More

This forum has been closed.
Comment Sorting
Comments
     
by: FirozaliA.Mulla DBA from: Dar-Es-Salaam Tanzania
January 30, 2013 3:16 PM
The US economy shrank 0.1 per cent at an annualised rate in the fourth quarter of 2012, rattling financial markets as one-off factors overwhelmed resilience in underlying demand. Much of the fall in gross domestic product was due to a big reversal in business inventories and a plunge in federal defence spending – both highly volatile – which each knocked 1.3 percentage points off growth. That suggests the underlying economy remains on a weak but stable growth path of 1-2 per cent. But the first reported decline in the US economy since the end of the recession in 2009 is a blow to confidence and highlights the uncertainty caused by fiscal policy. Market expectations were for a rise of 1.1 per cent. Consumption grew by 2.2 per cent at an annualised rate, adding 1.5 percentage points to growth, while business investment shrugged off fiscal cliff concerns to rise by an annualised 8.4 per cent, and housing investment rose by an annualised 15.3 per cent.



Those numbers pointed to healthy underlying demand. “Frankly, this is the best looking contraction in GDP you’ll ever see,” said Paul Ashworth, chief US economist at Capital Economics in Toronto. “First-quarter GDP growth is going to be pretty weak because of the expiry of the payroll tax cut. But there is nothing in these figures to change our view that US GDP growth will accelerate as this year goes on,” he said. The weakness came from two categories that are notorious for their volatility. Inventory growth – which over the long run should average out to roughly zero – had added 0.7 percentage points to gross domestic product in the third quarter and defence spending had added 0.6 percentage That suggests a better guide to the underlying state of the economy is to look at the fourth quarter alongside third-quarter growth of 3.1 per cent – ending up with a mediocre, but steady, average of 1.5 per cent. “While inventories and government are what are most likely to catch the market’s eye it is hard to put a particularly positive spin on such a weak headline,” said David Semmens, senior US economist at Standard Chartered. “It will be important for Friday’s employment number to settle people’s nerves that this [the GDP figures] reflect the fiscal cliff concerns rather than a genuine stalling of the US economy.” There was an encouraging sign for Friday’s payrolls report when ADP, the private payrolls processing company, said on Wednesday morning that its survey found 192,000 new jobs created in December. Job growth was particularly strong at small businesses, it reported. The effects of the protracted negotiations to avoid the fiscal cliff – as government spending cuts and tax rises were due to be triggered by year-end – were in evidence in a large rise of 6.8 per cent in disposable incomes in the fourth quarter. Given modest wage and jobs growth, the most likely explanation was that wealthier consumers brought income and capital gains forward into 2012, in the expectation that tax rates were about to rise. Points. Both were more than reversed in the following three months. This was expected as there are feuds with the immigration and the gun laws these have to be polished yet I thank you Firozali A.Mulla DBA









Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs