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Government shutdown cost US economy $24 billion

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Government shutdown cost US economy $24 billion

The 16-day partial government shutdown cost the American economy $24 billion, according to Standard & Poor’s Rating Services. The loss shaves at least 0.6 percent from fourth quarter gross domestic product.

The economic impact of the budget impasse could have been much worse had bipartisan Senate leaders failed to reach an agreement before the October 17 deadline. On Wednesday Senate Majority Leader and Nevada Democrat Harry Reid struck an accord with his Republican counterpart, Mitch McConnell, to lift the budget impasse and raise the debt ceiling. The new accord funds the US government through January 15, 2014 and raises the debt limit through February 7.

Consumer confidence in economic activity dropped to its lowest level in almost two years, according to Bloomberg’s October Consumer Confidence Index. The S&P has warned consumer confidence can fall further “If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse…” It remains to be seen whether the 16-day downturn will have any lingering effects on small businesses. Economists are already looking ahead, and are more likely to perceive the slowdown in GDP growth as a small glitch on the path toward recovery. According to the Federal Reserve, economic growth was ‘modest to moderate’ during the budget impasse.

The S&P revised its annualized growth projection for the US economy from 3 percent to around 2 percent, according to Bloomberg. Massachusetts-based IHS Inc. reduced its fourth quarter GDP estimate to 1.6 percent, down from its earlier estimate of 2.2 percent.

Hundreds of thousands of federal employees returned to work Thursday after the 16-day furlough. The agreement that was passed by Congress and signed by President Barack Obama includes back pay for the workers. The conditions won’t be the same for thousands of other workers employed under contract.

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