GDP Reading Shows Economy Contracted in 4Q

The U.S. economy shrank at a 0.1% annual rate in the fourth quarter, the Commerce Department reported Wednesday.

The negative gross domestic product rate was well below economists’ median forecast of a 1.1% growth rate and was the worst reading since the second quarter of 2009, Bloomberg News reported.

The GDP reading — the first of three to be released for the quarter — followed a 3.1% growth rate in the third quarter. For the full year, GDP rose 2.2%, following a 1.8% growth rate in 2011.

The economy was restrained by the biggest decline in defense spending in four decades, and lower government spending combined with declining inventories accounted for a combined 2.6 percentage points from economic growth, Bloomberg said.

Superstorm Sandy, which caused widespread damage in the Northeast in late October, also contributed to the quarter’s economic downturn, Commerce said.

Household purchases rose at a 2.2% rate in the quarter, up from a 1.6% rate in the previous quarter, and topped the 2.1% rate forecasted by analysts, Bloomberg reported.