For the first time in more than three years, the US economy contracted 0.1 per cent in the last three months of 2012 as sharp cuts in government spending derailed the fragile recovery.

The unexpected contraction adds to the concerns about the struggling global economy which is already battling the European debt turmoil and slowing growth in many developing countries including India.

"Real gross domestic product -- the output of goods and services produced by labour and property located in the US -- decreased at an annual rate of 0.1 per cent in the fourth quarter of 2012," the US Commerce Department said today.

Defence spending were slashed more than 22 per cent in the fourth quarter of 2012.

The latest economic contraction -- first time since the second quarter of 2009 when there was recession -- happened at a time when America was staring at a fiscal cliff.

Real GDP had increased 3.1 per cent in the 2012 third quarter.

In a statement, the Commerce Department said the contraction primarily reflected "negative contributions from private inventory investment, federal government spending, and exports".

The projection of 0.1 per cent GDP contraction is based on incomplete data and could be revised, it noted.

"Real federal government consumption expenditures and gross investment decreased 15 per cent in the fourth quarter, in contrast to an increase of 9.5 per cent in the third (quarter).

"National defence (spending) decreased 22.2 per cent, in contrast to an increase of 12.9 percent," the statement said.

However, real personal consumption expenditures rose 2.2 per cent in the fourth quarter of 2012 from 1.6 per cent in the previous three months.