WASHINGTON (REUTERS) - The US economy barely grew in the fourth quarter although a slightly better performance in exports and fewer imports led the government to scratch an earlier estimate that showed an economic contraction.
Gross domestic product expanded at a 0.1 per cent annual rate, the Commerce Department said on Thursday, missing the 0.5 per cent gain forecast by analysts in a Reuters poll.
The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate.
However, much of the weakness came from a slowdown in inventory accumulation and a sharp drop in military spending.
These factors are expected to reverse in the first quarter.
Consumer spending was more robust by comparison, although it only expanded at a 2.1 per cent annual rate.
As household spending powers about 70 per cent of national output, this still-lacklustre pace of growth suggests underlying momentum in the economy was quite modest as it entered the first quarter, when significant fiscal tightening began.
Initially, the government had estimated the economy shrank at a 0.1 per cent annual rate in the last three months of 2012.
That had shocked economists.
Thursday's report showed the reasons for the decline were mostly as initially estimated. Inventories subtracted 1.55 percentage points from the GDP growth rate during the period, a little more of a drag than initially estimated. Defence spending plunged 22 per cent, shaving 1.28 points off growth as in the previous estimate.
There were some relatively bright spots, however. Imports fell 4.5 per cent during the period, which added to the overall growth rate because it was a larger drop than in the third quarter. Buying goods from foreigners bleeds money from the economy, subtracting from economic growth.
Also helping reverse the initial view of an economic contraction, exports did not fall as much during the period as the government had thought when it released its advance GDP estimate in January.