HispanicBusiness

The US economy unexpectedly shrank late last year in a sharp turnaround from the third quarter, a drop blamed in part on smaller defence outlays, new data said Wednesday.

The economy contracted by an annualized 0.1 per cent in the fourth quarter of 2012 following 3.1 per cent growth in the third quarter, said the Commerce Department.

It was the worst quarterly gross domestic product (GDP) - the volume of all goods and services produced - since the second quarter of 2009, when the US economy was in the recession.

The fourth quarter decline reflected a large drop in defence spending - 22.2 per cent in the October-to-December period, according to the Commerce Department's Bureau of Economic Analysis.

This alone took 1.3 percentage points off GDP, Bloomberg said.

The bureau also blamed smaller private inventory investment, exports and state and local government spending. The bureau said real exports fell 5.7 per cent in the fourth quarter.

A Bloomberg survey of economists had forecast GDP growth. The median in the survey was 1.1 per cent, Bloomberg said.

For all of 2012, the US economy expanded 2.2 per cent after 1.8 percent growth the previous year.

The bureau emphasized that the fourth-quarter estimate was based on source data that are incomplete or subject to further revision. The second estimate for the fourth quarter, based on more complete data, will be released on February 28.