America's economyStumble or worse?Jan 30th 2013, 16:08 by R.A. | WASHINGTON

AMERICA has lately seemed to levitate above the economic difficulties plaguing other rich countries, from

Europe, to Britain, to Japan. This morning's news, that the American economy shrank at a 0.1% annual

pace in the last three months of 2012, may therefore come as a bit of a shock to many. A slowdown from

the 3.1% growth notched in the third quarter was expected, but outright contraction was not. The surprise

may fuel muttering about the threat of a double-dip recession, but the news is less bad than it seems.

Calling a new recession would be premature, for several reasons.

First, it is important to note that this is the government's advance report, which will subsequently be

revised several times. Growth in the third quarter was initially reported at just 2.0% before being revised

up more than a percentage point. Second, the bad number is driven by a few one-off peculiarities in the

data. Federal defence spending shrank at a striking 22% annual pace in the fourth quarter, knocking 1.28

percentage points off of growth. That was mostly (though not entirely) due to typical shifting of spending

into the third quarter ahead of the end of the fiscal year in September. (Correspondingly, the 0.64

percentage-point defence contribution to growth in the third quarter was somewhat overstated.) A big

change in private inventories also knocked 1.27 percentage points off of growth. Real final sales grew at

more than a 1% annual pace for the quarter, suggesting that underlying demand continues to grow, albeit

weakly.

Concern is not entirely unjustified, however. Exports turned in a particularly dismal performance, reflecting

in part the weakness across much of the world economy that will continue to be a source of worry for

America. Personal consumption helped carry the economy forward in the fourth quarter, growing at a

2.2% annual pace. The American consumer may have a harder slog in 2013, however, thanks to fiscal

tightening, and especially the lapsing of the payroll tax cut at the end of 2012. Other cuts may loom; if

planned spending cuts—the "sequester"—are allowed to take place, defence spending will tumble even

more, dragging growth down with it.

But there are encouraging signs as well. Investment looked healthy in the fourth quarter. Equipment and

software investment rose at a 12.4% annual pace. Perhaps more heartening was the 15.3% surge in

residential investment, so long a drag on the economy. As the housing sector continues to strengthen, it

will provide a welcome bulwark against other headwinds. State and local government spending

subtracted slightly from growth to end the year, as it has done for most of the past three years, but that

too should soon switch back to positive contributions.

All in all, the fourth quarter performance is more warning shot than recession indicator. Underlying growth

is positive but vulnerable to disruptions from abroad or from Washington. Now is no time for careless

policy.