Watch The Government Shutdown Eat Away At GDP Growth

View this email online | Add newsletter@businessinsider.com to your address book

		Home Tech Finance Markets Politics Strategy Entertainment Advertising Retail Sports Life Wednesday, October 2, 2013 Watch The Government Shutdown Eat Away At GDP Growth The U.S. government is still shut down. "We estimate the current shutdown would reduce growth by 0.2pp in Q4 on an annualized basis if it lasted a week, and 0.4pp if it lasted two weeks," wrote Goldman Sachs' Alec Phillips. As you can see in the chart, the biggest impact on growth in the near-term will come from the fact that employees won't be getting paid. "Compensation of federal employees is counted as federal consumption in the national accounts, so each day that federal employees do not go to work and are not paid results in a reduction in federal consumption," added Phillips. "For every day of shutdown, federal compensation in Q4 is reduced by $400 million, or $1.6 billion at an annual rate." Phillips' estimates don't account for some of the collateral damage the shutdown could have. "Beyond the direct effect on federal consumption, if the shutdown continues for an extended period, the uncertainty it creates could also lead to downward pressure on growth, at least temporarily," added Phillips. Assuming the government eventually comes back online, however, much of the lost growth should be recouped. "Growth would bounce back in Q1 2014 by roughly the same amount as the negative effect in Q4, once the level of federal spending returned to its non-shutdown level," he added. "However, beyond the restoration of compensation spending to its non-shutdown level, since most of the effect of the shutdown is a cancellation of spending and only a small portion would be a delay into the next quarter, we would not expect the level of overall federal spending in Q1 to be boosted by the delayed spending from Q4 by more than a small amount." For now, each day the government is closed, the more growth will shrink. Read » Also On Markets Today: STOCKS FALL: Here's What You Need To Know Tesla Issues Statement On Fiery Car Crash That Caused The Stock To Tank Advertisement CHART OF THE DAY: The Shutdown Has Had No Noticeable Affect On Consumer Confidence CHART OF THE DAY: A Government Shutdown Is No Reason To Be Selling Stocks CHART OF THE DAY: How The Stock Market Traded Before And After The Last 3 Policy Time Bombs Share this: Facebook Twitter Digg Reddit StumbleUpon LinkedIn The email address for your subscription is: ipat39@gmail.com Change Your Email Address | Unsubscribe | Subscribe | Subscribe to the Markets RSS Feed Business Insider. 257 Park Avenue South, New York, NY 10010 Terms of Service | Privacy Policy

If you believe this has been sent to you in error, please safely unsubscribe.