More importantly, however, the figure does not reflect any seething malaise in the American economy. Because the negative output growth comes laden with the effects of Hurricane Sandy, inventory depletion by businesses and stringent cuts in military spending, scheduled by Washington. Hurricane Sandy contributed to the lag by causing a total fixed-asset damage worth at least $44 billion, besides significantly halting trade. Otherwise, inventory depletion in the fourth quarter, as businesses began to sell of the excess $60 billion worth of inventories they had accumulated in the 3rd quarter, shaved off 1.27% of the growth. And lastly, contraction in defence spending, which plunged by 22.2% in the fourth quarter, took away 1.28% of the economic growth.
Meanwhile, indicators symbolising economys vitality remain relatively strong. Personal consumption increased by 2.2%, exhibiting brimming consumer-confidence, while the housing market too seemed to be rebounding with the residential fixed investment rising by over 15%. Whats more, the US economy added 192,000 jobs. Nevertheless, the negative effects of defence spending do show what could go wrong if the dreaded sequesters (from March 1) were to take effect. So, perhaps the biggest threat for the US is political dysfunction.