It's "the best-looking contraction in U.S. GDP you'll ever see," Paul Ashworth, chief U.S. economist for Capital Economics said in a research note. "The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging."
The other major drag came from business inventories declining in the fourth quarter. When that happens, it often signals businesses will have to buy more goods in the upcoming quarter to restock their shelves, which could lead to stronger growth in the first quarter of 2013.
These two quotes only mention two components of GDP, government spending and inventories. I however do agree that a negative on the government spending component is a good thing.
The major component of GDP is consumer spending. Consumer confidence did tick lower in yesterday's report. Is this indicative of lower consumer spending in 1Q13? Probably. I mention probably because of three things, 1) anemic job creation, 2) tax increases, and 3) regulatory roadblocks to economic expansion.
Also the minor component, imports was positive last quarter. I fully expect this component to turn negative this quarter (as it usually is).
Thus to print a positive GDP for 1Q13 and to keep us out of an official recession (2 consecutive quarters of negative GDP growth) government spending and inventories are going to have to offset any negative consumer spending and imports that face serious "headwinds" in this quarter.
This post was edited on 1/30 at 9:32 am