As the US economy slipped to an annualized rate of 0.1% in the fourth quarter of 2012, the rate of growth in Asia surpassed all expectations.
During the last quarter, the Philippine and Taiwan economies grew more than forecasted while Singapore’s jobless rate fell to a five-year low, signaling an upswing at the end of 2012 that underscores Asia’s role leading a global recovery. The gross domestic product in the Philippines grew 6.8 percent while Taiwan reported a preliminary 3.42 percent gain. Singapore’s unemployment was 1.8 percent.
If true, it would be the first contraction reported by the US economy since the 2009 global recession with its economy growing only 3.1% during the third quarter. The weak fourth quarter period may be due to "fiscal cliff" where spending cuts and tax rises that had been due to come into force from 1 January were narrowly avoided by a last-minute deal between the Republican-dominated Congress and the White House.
The fourth-quarter shrinkage in economic output came as a shock to analysts on Wall Street, who had been expecting 1.1% growth according to a poll by news agency Reuters. Not even one economist surveyed had predicted an economic contraction.
Growth was dragged down by a 22% cut in the federal government's defense spending and by the decision of many businesses to halt the rapid rebuilding of their inventories that began over the summer. These two factors combined removed 2.6 percentage points from the overall growth figure.
Asia’s resurgence contrasts with the U.S. China reported an unexpected decline in gross domestic product after drastically lowering its defense spending. At the same time, Japan’s economic outlook depends on Prime Minister Shinzo Abe raising wages and stimulating spending.
“Asia is leading the global recovery,” said Glenn Levine, an economist at Moody’s Analytics in Sydney. “China has started to gather momentum as the various domestic stimulus policies kick in and that lifts the region.”