Economists have estimated that each week that the federal government shutdown continues will shave 0.1 to 0.2 percentage points from fourth-quarter real GDP growth. Assuming that the shutdown lasts three to four weeks, that would reduce US real GDP growth from the expected 2.5% to 2%. In a blog post, Forrester’s Andrew Bartels explains what that will mean specifically for the US tech market.
“At a time when US economy has been limping along and not generating enough new jobs to reduce US unemployment, this entirely avoidable slowdown is not something the US tech market needs. Why? Because with the US tech market growing about twice as fast as real GDP, the half percentage point slowdown in the US economy will translate to a one percentage point slowdown in US tech spending.”
Andrew goes on to explain that while the shutdown is mildly bad for the economy and the tech market, failure to raise the debt ceiling would be far worse. “Even if the default lasted just a few days, confidence in the US government and economy would take a hit, leading to big drops in US stock prices and to the investment portfolios and retirement savings of millions of Americans, as well as cutbacks in business investment, housing, and consumer spending,” he writes. “The US economy would almost certainly decline in Q4 2013 and Q1 2014, with potentially continued declines or at best weak growth in the rest of the year. Should this happen, US tech spending would fall in 2014, with poor prospects after that.”
Read the full blog post here.