Closing-Down Sale

US government shuts down

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What's going on?

Official data released on Friday showed that the US economy grew a little less than previously thought last quarter. But perhaps more significant for markets is a shutdown of the country’s government that started on Saturday (tweet this).

What does this mean?

It turns out that the US economy grew 3.4% on last year in the third quarter, compared to the 3.5% suggested by initial data. Revisions like this are relatively common as a more complete picture becomes available – so investors aren’t too put out.

A more pressing concern is the partial US government shutdown that kicked off over the weekend. The government has to regularly sign off on the US increasing its debt beyond pre-agreed levels and decide how the additional money is used. The two main parties couldn’t agree on proposed spending plans – so, for non-essential parts of the government that haven’t already had their spending approved, there’ll be no spending at all.

Why should I care?

For markets: More of that doggone uncertainty.

Stocks fell on Friday, likely because investors feared that even slower economic and business growth could result from the shutdown, thanks to lower demand from Credit rating agency Standard & Poor’s estimates that the US economy will lose $1.2 billion each week government departments remain in limbo. That’s significant – but perhaps not that huge when you consider the country had $20 trillion of economic output this year.

The bigger picture: Looking at the other side of the pond: the UK’s ticking along – but Europe’s looking fragile.

November data showing the UK economy grew at its fastest rate since 2016 was confirmed on Friday, while the numbers from France weren’t quite as chic. French consumer spending unexpectedly fell in November compared to October: Black Friday may have tempted shoppers, but its effects were offset by mass protests costing retailers an estimated $1 billion of sales. The French malaise was compounded by updated data showing the country’s economy also grew more slowly than thought in the third quarter.

Originally posted as part of the Finimize daily email.

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