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Government shutdown results in big US GDP downgrade

by Dylan Lobo on Feb 28, 2014 at 14:27

Government shutdown results in big US GDP downgrade

The US economy expanded at a slower rate than previously estimated in the final three months of 2013.

Fourth quarter GDP growth was revised down from an initial reading of 3.2% to 2.4%. The more tepid performance in the final months of the year follows the 4.1% surge in the third quarter.

Capital Economics' Paul Ashworth was not too concerned by the downgrade, pointing out the growth was still impressive given the goverment shutdown in October as the nation tried to find a resolution to its debt crisis. The shutdown resulted in a 5.6% drop in public spending, which subtracted more than 1% from growth.

For Ashworth the good news was the 7.3% increase in business investment, revised up from the initial estimate of a 3.8% gain, which helped to offset an 8.7% decline in residential investment.

He is now predicting a 2% growth in the first quarter of 2014, before an escalation towards the 3% mark.

'Once the weather-effects begin to unwind in the second quarter, we would anticipate a pick-up in GDP growth to nearer 3% annualised over the remaining three quarters of this year,' Ashworth said.  

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