Posted Thursday, Oct. 17, 2013
A women holds a sign outside the U.S. Capitol after Senate leaders announced a deal to end the government shutdown.
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By Kevin G. Hall
McClatchy Washington Bureau
WASHINGTON —
How much damage was inflicted on the economy? That’s the million-dollar
question as a 16-day partial government shutdown draws to an end and a
crippling debt default apparently was averted.
The economy already
was slowing ahead of the debacle in Washington, and for more than half
of October, there’s been no official government data on which to gauge
the health of the economy.
“It feels like things have gone a bit
soft, but we really don’t have the hard data to know to what degree that
happened,” said Mark Zandi, the chief economist for forecaster Moody’s
Analytics.
There’s plenty of anecdotal evidence, though, that harm has been done.
One
gauge came Wednesday from the Investment Company Institute, which
reported that for the week ending Oct. 9, investors had pulled about
$3.1 billion out of mutual funds composed of stocks and another $2.6
billion fled these funds made up of bonds.
More evidence came in
the recent Economic Confidence Index, published regularly by Gallup. The
reading for the three-day period that ended Oct. 3 had fallen 12 points
in less than a week. That caught the attention of the National Retail
Federation, whose members hire in big numbers.
“Only the collapse
of Lehman Brothers in September 2008 has done more damage to consumer
confidence in such a short period of time,” the retail federation said
Oct. 9 in a statement. “Retailers represent the sector of the American
economy that is most closely tied to consumer attitudes, and these
numbers are deeply concerning.”
A week later, the confidence reading had fallen another 5 points.
Gallup’s
numbers in August 2011, the last debt-ceiling battle, showed sharp
drops in confidence that later translated into lower retail sales and
economic deterioration.
This year’s uncertainty follows a drag on
growth that began early this year with the end of a holiday on payroll
taxes and continued with reduced federal spending, especially defense
spending.
Economists think that these factors and political
squabbling will combine to shave about 1.5 percentage points off what
the nation’s growth rate otherwise would have been in 2013.
“I
don’t think it has undermined the recovery . . . but it certainly is
going to take a bite out of growth,” Zandi said. “Brinksmanship just
adds to the weight of fiscal policy on the economy.”
Wells Fargo
Securities in Charlotte, N.C., estimates that the shutdown will lop off
no more than half a percentage point of growth over the final three
months of this year.
“The primary reason for the minimal economic
impact during this shutdown stems from the fact that most of the
negative effects and the subsequent positive bounce-back effects are
currently expected to be contained within the same quarter of growth,”
John Silvia, the group’s chief economist, wrote Wednesday.
Economists
are looking carefully at same-store sales and similar retail data to
gauge how much the sap in confidence will affect holiday sales.
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Government shutdown took $24 billion out of economy, according to Standard & Poor's
Posted: 8:09 PM
Last Updated: 18 hours and 11 minutes ago
NEW
YORK - The United States may have dodged an economic catastrophe by
raising the debt ceiling and opening the government, but it didn't
emerge from the political debacle unscathed.
The 16-day government
shutdown took a $24 billion chunk out of the U.S. economy, according to
an initial analysis from Standard & Poor's.
As a result, the
rating agency projects that the U.S. economy will grow by an annual pace
of around 2.4% in the fourth quarter -- as opposed to the roughly 3%
growth rate predicted prior to the shutdown.
"Given the size of
the economy, it's small. But because it's happening all at once, so
quick, so fast, unplanned; it's going to hurt," said Beth Ann Bovino,
U.S. chief economist at S&P. "We can absorb it, but it still hurts."
Hundreds
of thousands of federal workers were furloughed during the shutdown,
but that was just one of the widespread effects of the first shutdown in
nearly two decades.
Federal contractors also furloughed thousands
of employees. Small businesses reeled from frozen government contracts
and stalled business loans. Closed national parks hit the tourism
industry, while military families saw childcare and other services
shuttered.
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