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Revised GDP: US economy actually grew in fourth quarter, but barely

Growth of the US economy in the fourth quarter wasn't negative after all, revised GDP figures show. But the new 0.1 percent rate is still lower than what many economists expected.

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Charlie Kline (l.) works on a machine affixed with a 'Made in the U.S.A.' plate at the FesslerUSA apparel manufacture in Orwigsburg, Pa., Oct. 2012. A revised estimate of fourth-quarter gross domestic product, released Thursday, shows the US economy showed a smidgen of positive growth: a 0.1 percent annualized rate, to be precise.

Matt Rourke/AP

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It turns out America’s economic growth didn’t turn negative at the end of last year, after all.

A revised estimate of fourth-quarter gross domestic product, released Thursday, shows the US economy with a smidgen of positive growth: a 0.1 percent annualized rate, to be precise.

That’s a welcome upgrade, after an initial estimate last month showed a GDP decline of 0.1 percent.

“The only surprise in the upward revision … is that it wasn't bigger,” Nigel Gault, chief US economist at IHS Global Insight, wrote in an analysis of the government’s report.

That’s because the economy has been growing in general at something close to a 2 percent pace, driven by gains in consumer spending, business investment, and home building. 

The weak fourth quarter stemmed from two factors that can be volatile: business inventories (down for the quarter) and federal spending on defense (also down by an unusually large amount).

Mr. Gault says the economy’s growth rate seems set to rebound to 2 percent in the first quarter, or a bit higher. A big question, however, is what Congress and President Obama will do about the impending sharp cuts in federal spending, known as the “sequester.”

Those cuts are scheduled to take effect on March 1, with the aim of bringing down federal deficits. They are also expected to dampen GDP growth, as less money gets spent to pay for everything from Navy ships to teacher's aides.

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