U.S. Commerce Department: Economy shrinks in fourth quarter

Blame it on the fiscal cliff negotiations, Hurricane Sandy, or cutbacks in business inventories, but the U.S. economy shrank in the fourth quarter of 2012, according to the Commerce Department.

The nation’s gross domestic product declined at an annual rate of 0.1%, its first dip since 2009, in the three-month period from October to December.

A 15% decrease in government spending also contributed to the decline, which is based on a preliminary report that could be revised as more data are gathered.

Economists had expected growth of at least 1%, following a 3.1% upswing in the third quarter.

The slight downturn does not mean the economy officially is in recession – that requires two consecutive quarterly contractions – but few economic expansions include a quarterly dip.

With the country having avoided the worst budgetary and tax fears of the fiscal cliff, subsequent quarterly reporting could make this recovery one of the rare expansions with a short-term dropoff.