The longest government shutdown in U.S. history apparently had a negative impact on the U.S. economy.
According to figures released by the Commerce Department’s Bureau of Economic Analysis, the 43-day shutdown – along with a slow-down in consumer spending – slowed economic growth.
Gross domestic product increased at a 1.4% annualized rate last quarter, the Bureau of Economic Analysis said in its advance estimate of fourth-quarter GDP on Friday, according to a report from Reuters. Economists polled by Reuters had forecast GDP rising at a 3.0% pace. The survey was, however, completed before data on Thursday showing the trade deficit widening to a five-month high in December, Reuters reported.
The economy grew at a 4.4% pace in the third quarter. The nonpartisan Congressional Budget Office had estimated the government shutdown would subtract 1.5 percentage points from fourth-quarter GDP through fewer services provided by federal workers, lower federal spending on goods and services and a temporary reduction in Supplemental Nutrition Assistance Program benefits, Reuters reported.
The CBO forecast most of the lost output would eventually be recovered, though between $7 billion and $14 billion would not.
The report, which was delayed by the shutdown, highlighted a jobless economic expansion as well as a “K-shaped” economy, in which upper-income households are doing well while lower-income consumers are struggling amid high inflation from import tariffs and stalling wage growth, according to Reuters.
Growth in consumer spending slowed from the third quarter’s 3.5% pace. Economists say spending has largely been driven by higher-income households and has been at the expense of saving as inflation eroded buying power, according to Reuters.
