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US Federal shutdown likely chipped away at GDP growth
November 7, 2013, 5:12 pm

The effects of the shutdown will shave some points from third quarter GDP growth [Getty Images]

The effects of the shutdown will shave some points from third quarter GDP growth [Getty Images]

Despite figures showing improved quarter-on-quarter GDP growth, the US economy is expected to be given a mixed review when employment figures are released on Friday.

The Commerce Department reported on Thursday that the economy had increased growth from 2.5 per cent in the second quarter to 2.8 per cent in the third.

But this better-than-expected figure is likely to be slashed by 0.5 per cent when the effects of the government shutdown for some three weeks in October are factored in, experts say.

On October 30, the US Bureau of Labour Statistics estimated that while the unemployment rate remains largely unchanged since August at 7.2 per cent, hundreds of thousands of people filed for unemployment benefits in the wake of the shutdown.

Figures revealed that it was the highest surge in unemployment benefit applications since November 2012.

There was also bad news in retail and consumer confidence. The Commerce Department registered a decrease in retail sales while the US Producer Price Index also fell short of expectations, the first downturn since April.

Consumer spending took a beating during the peak of the shutdown in October, in particular.

All added up, the figures are likely to dampen the mood at the Federal Reserve which has been looking for ways to phase out an $85-billion stimulus package known in economic circles as the quantitative easing programme.

Source: Agencies

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