October 17, 2013

Debt-limit deal still leaves a cloud over economic prospects

Unless a long-term agreement is reached, the government – and the economy – will contend with new deadlines early next year.

By Christopher S. Rugaber
The Associated Press

(Continued from page 1)

A report from the Federal Reserve on Wednesday offered fresh evidence of the economic impact of the shutdown and debt limit fight. The Fed’s report on economic conditions in its 12 banking districts found employers in several districts were reluctant to hire because of uncertainty surrounding budget policies and the new health care law.

Manufacturing growth slowed in the New York region in October, builders were less confident in the housing recovery and growth slowed in four Fed districts. All the reports cited the federal shutdown and impasse over the debt limit as reasons for the declines.

Several companies have also cited the shutdown as a likely drag on sales and earnings. Linear Technology, a semiconductor company, on Tuesday lowered its revenue outlook for the final three months of the year because of the shutdown.

Some analysts think the Fed is now unlikely to slow its monthly bond purchases until well into next year. The Fed has been buying $85 billion a month in Treasury and mortgage bonds to try to keep long-term interest rates low.

The full economic effect of the budget standoff could take a month or more to assess because the release of so much economic data has been delayed. And Drew Matus, an economist at UBS, says that much of the economic data will be distorted by the effect of the shutdown, making it harder to discern underlying trends.

Weekly applications for unemployment benefits, for example, spiked last week, partly because of workers who were temporarily laid off by government contractors and other affected companies. Those figures are collected by the states.

“We’re in the dark,” says Robert DiClemente, chief U.S. economist at Citigroup. “It’s going to be a while until we have good answers to all these questions.”

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors

Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)


More PPH Blogs