/.../Defense procurement reached its height in 2008 at nearly $400 billion for the year, and it has fallen steadily since. Last year, contract awards dropped 15 percent below the peak, after adjusting for inflation.
But many of those contracts are for complex weapons and machinery that can take years to build. The GDP report does not count them as government purchases until they are actually delivered. In other words, much of the slowdown in contract awards is only now showing up as a decline in government spending.
That also means the Pentagon's $500 billion in budget cuts required by the sequester could hold back GDP growth for years to come.
"If you're looking at earnings of defense companies, you're not going to see a hit on that for a while as a result of sequestration," said Todd Harrison, a senior fellow in defense budget studies at the Center for Strategic and Budgetary Assessments.