(MENAFN - Kuwait News Agency (KUNA)) The U.S. economy unexpectedly contracted for the first time since the aftermath of the 2009 financial crisis, driven by a drop in defense spending, according to the Commerce Department on Wednesday. The U.S. gross domestic product (GDP) shrank 0.1 percent from October through December, despite strong consumer spending and business investment. It is a sharp contrast from the 3.1 percent growth rate in the July-September quarter.
In addition to the steep 22 percent drop in defense spending, the GDP was drive down by fewer exports and smaller stockpiles of business inventories, according to the Commerce Department. Economists say the findings are not an indicator of recession, as weakness was mainly the result of one-time factors, such as the defense spending cuts and slower inventory growth. These one-time factors are considered volatile and subtracted a total of 2.6 percent from the GDP.
The White House says the report reminds lawmakers to work together to pass a "responsible" federal budget. "Some of the fiscal issues that may have weighed on the economy in the fourth quarter of 2012 were resolved with the passage of the American Taxpayer Relief Act in early January, which provided more than 98 percent of Americans and 97 percent of small businesses with the certainty that their income taxes will not rise," the White House said in a statement.
"Todays report is a reminder of the importance of the need for Congress to act to avoid self-inflicted wounds to the economy. The administration continues to urge Congress to move toward a sustainable federal budget in a responsible way that balances revenue and spending, and replaces the sequester, while making critical investments in the economy that promote growth and job creation and protect our most vulnerable citizens."