While the modest decline in GDP is likely to spur use of the "R" word (recession) in the media, it is worth noting that today's release is the advanced estimate for real GDP and is subject to revisions which can be substantial. Moreover the contraction in output was almost entirely due to an unprecedented plunge in defense spending, which along with slower private inventory accumulation, pared 2.6 per cent from real GDP growth. In fact, the underlying details of the report were actually quite positive. Consumer spending accelerated on the largest personal income gains in four years while both business spending and residential construction investment grew at a double digit rate. These details, along with strong employment growth in recent months, suggests that US growth will pick-up in the first quarter of 2013.
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