GDP Contraction Last Quarter

http://money.cnn.com/2013/01/30/news/economy/federal-reserve-policy/

For the first time in three years, the US economy contracted at the end of 2012. A .1% decrease in quarterly GDP marked the first negative quarter-to-quarter margin since the -5.3% margin in the first quarter of 2009. Many speculate as to whether or not this decrease will mark a downward turn in the economy for the upcoming year.

The negative margin, though, has been attributed to several factors. Hurricane Sandy, for example, has been held responsible for a $35.6 billion loss in private fixed assets. Outside factors like this can shock the economy, but are not necessarily a cause for alarm.

Military spending cuts may also be responsible for the drop in GDP. A dramatic drop in defense spending this last quarter will be followed by less dramatic cuts in the upcoming year, which should level out the GDP margin in the next few years.

The GDP declined last quarter; this isn't a detail to be overlooked. But there are very temporary factors which may be responsible for the decline, and I don't think there is any reason to sound the alarm.