US economy

Shutdown knocked billions from US economy


The federal government shutdown probably shaved $8bn off US economic activity in the current quarter, following a $3bn reduction in the final quarter of 2018, and the economic side-effects would have been increasingly damaging if the impasse had continued more than five weeks, the Congressional Budget Office said.

The watchdog estimated that the shutdown will trim the level of real gross domestic product by 0.2 per cent in the current quarter, after being lowered by 0.1 per cent in the final quarter of last year. There should be a bounce of 0.1 per cent in the second and third quarters as federal spending rebounds, but the office warned that some $3bn in foregone economic activity will never be recovered.

The assessment comes after President Donald Trump on Friday signed a bill to reopen the federal government for three weeks. The two sides are now preparing for intensive discussions on Capitol Hill over border security spending, but Mr Trump has warned that he could resort to a new shutdown if they fail to strike a deal that he supports.

Businesses’ problems obtaining federal permits and loans during the shutdown were probably beginning to lead firms to postpone investment and hiring decisions, the CBO found. “The negative effects of such factors would have become increasingly important if the partial shutdown had extended beyond five weeks,” the CBO said.



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