US reports surprise Q4 shrinkage

<p>The Commerce Department has delivered the surprising news that the US economy shrank in Q4.</p>

The US has reported that its economy shrank in the final three months of 2012, which has come as a surprise to the markets, as economists' forecasts had not anticipated a decline.

According to initial official estimates from the Commerce Department, output contracted at an annualised rate of 0.1 per cent in the fourth quarter, after advancing by 3.1 per cent in the third quarter.

This, it was confirmed, would be the first shrinkage logged by the world's number one economy since the 2009 global recession.

The contraction falls against a backdrop of tightening fiscal policy and risks sparking fresh fears of a new recession and creates an urgency for policymakers to deal with outstanding budget issues.

It is thought that the fears surrounding the fiscal cliff – which was avoided after White House negotiations on January 1st – are responsible for this latest shrinkage.

At market open today (January 30th), the Dow Jones Industrial Average slipped by a marginal 11.4 points to 13942.9 points.

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