Government shutdown could knock 0.6 percentage points off fourth quarter growth


As the US federal government enters its fourth day of shutdown, economists at IHS Global Insight say that a shutdown lasting as long as a week could see GDP take a hit.

They've said that assuming the shutdown lasts seven days, GDP growth should now be 1.6 per cent in the fourth quarter (rather than 2.2 per cent previously forecast). But remember that those figures are annualised.

Before the shutdown Goldman Sachs warned that a shutdown of just two days would see annualised growth down by 0.1 percentage points - and that a shutdown of a week could see GDP take a 0.3 percentage point hit.

Yesterday the US Treasury said that if the current squabbles are not resolved within a fortnight - before the US debt ceiling is reached on 17 October - that it would have a "catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth."