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American economy's downturn

America's economy contracted in the last quarter of 2012, defying widespread sentiment among economists - most recently gathered in Davos - who were optimistic about the prospects for recovery.

Damaged by the biggest cut in defence spending in 40 years, fewer exports and sluggish growth in company stockpiles, the contraction is a blow to confidence far beyond Washington.

The decline is the first since the recession ended and occurred despite faster growth in consumer spending and business investment. The US Commerce Department confirmed that its economy contracted at an annual rate of 0.1% between October and December last year - the first contraction since the second quarter of 2009.