CUNA's Hampel to CNN Money: GDP Contraction Not a Recession

A fourth-quarter contraction in the U.S. economy is not a harbinger of recession, a Credit Union National Association economist told CNN Money Wednesday.
 
Federal government spending cuts and a drawdown of inventories by businesses caused the economy to contract for the first time in three years, CNN Money said.
 
"No one I know would seriously call this an indicator of recession," Bill Hampel, CUNA chief economist, told the publication.
 
Gross domestic product--the broadest gauge of U.S. economic growth--shrank at an annual rate of 0.1% last quarter, the Commerce Department said Wednesday. That constituted the first quarterly contraction since second quarter 2009, during the Great Recession.
 
Defense spending declined 22% in the fourth quarter, the department said. In the GDP report, defense spending usually is a volatile number and is not likely to decrease as much this quarter, Hampel told CNN Money.
 
The other drag last quarter was a drawdown of inventories. "Businesses were selling in the fourth quarter, but not replacing the stuff on the shelves," Hampel told the publication. "When inventories fall in one quarter, they're really likely to rise the next quarter."
 
The basic driver of the economy--consumer spending--appears to be in good shape, Hampel said, adding "the momentum in the economy is positive but not booming."  
 
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