Congress is poised to end the 16-day government shutdown, but the standoff has already done serious damage to the U.S. economy. Analysts at Standard & Poor’s estimate that the shutdown sucked $24 billion out of the economy, slicing at least 0.6 percent off of annualized fourth quarter GDP growth.
“The bottom line is the government shutdown has hurt the U.S. economy," S&P's chief U.S. economist, Beth Ann Bovino, wrote. "In September, we expected 3 percent annualized growth in the fourth quarter because we thought politicians would have learned from 2011 and taken steps to avoid things like a government shutdown and the possibility of a sovereign default. Since our forecast didn't hold, we now have to lower our fourth-quarter growth estimate to closer to 2 percent."
The agency also warned that the economic damage might not be over yet. Since the Congressional deal resolving the latest crisis is a temporary solution – the government will be funded through Jan. 15 and the debt limit will be extended until Feb. 7 – lingering uncertainty could weigh on consumer confidence heading into the holiday season.
“The short turnaround for politicians to negotiate some sort of lasting deal will likely weigh on consumer confidence, especially among government workers that were furloughed,” S&P said. “If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they'll remain afraid to open up their checkbooks. That points to another Humbug holiday season.”
