The US economy unexpectedly contracted in the fourth quarter of last year as businesses scaled back on restocking and government spending plunged.
Gross domestic product fell at a 0.1 percent annual rate, in contrast to the previous quarter when it grew 3.1 percent.
Even though this was the first decline since the 2007-09 recession, there was some good news with a pick-up in consumer spending and a rebound in business investment.
Still for policymakers, like those at the US central bank the Federal Reserve, the contraction could spur fears of a new recession.
The fact that the whole of last year the US economy grew by just 2.2 percent will certainly play into decisions from the two-day Fed meeting just wrapping up.
The report makes it more likely that Fed Chairman Ben Bernanke and the other decision makers will continue stimulating the US economy.