US growth slows, Fed says just temporary

The US economy unexpectedly contracted in the fourth quarter of last year.

But the experts say don’t panic – as consumer spending and business investment picked up.

They also point out that much of the decline was due to a plunge in government spending, particularly on defence, and businesses scaling back on restocking, that is letting their inventories fall.

Take those factors out and the US economy would have grown at a respectable 2.5 percent rate.

Gross domestic product declined at a 0.1 percent annual rate, by contrast in the previous quarter it grew by 3.1 percent.

Policymakers – like those at the US central bank, the Federal Reserve who have just completed their two-day policy meeting – did not seem too concerned and said the stall in growth was likely to be only temporary.

They also blamed weather related disruptions, a reference to super storm Sandy.

Fed Chairman Ben Bernanke and his colleagues left in place their 85 billion dollar a month bond buying stimulus plans.

The improvement in consumer spending in the fourth quarter means businesses will now have to replenish their stocks, which should help lift growth in the early part of this year.

In addition the jobs market seems to be improving. Private employers stepped up hiring in January, though still not to the level that the Federal Reserve has said is needed for it to end stimulus measures.

Copyright © 2013 euronews