The U.S. economy unexpectedly shrank from October through December for the first time since 2009, hurt by the biggest cut in defence spending in 40 years, fewer exports and sluggish growth in company stockpiles. The drop occurred despite stronger consumer spending and business investment.

The Commerce Department said on Wednesday that the economy contracted at an annual rate of 0.1 per cent in the fourth quarter. That was a sharp slowdown from the 3.1 per cent growth rate in the July-September quarter.

Economists said the drop in gross domestic product was not as bleak as it looked. The weakness was mainly the result of one-time factors. Government spending cuts and slower inventory growth, which can be volatile, subtracted a total of 2.6 percentage points from GDP.

More In: Economy | Business