US economy "blooms", Goldman Sachs talks about risk of government shutdown

Goldman Sachs has removed its forecast for a US government shutdown this year due to new geopolitical risks and the House Speaker election.

Kinh tế Mỹ 'lên hương', Goldman Sachs nói về nguy cơ đóng cửa chính phủ

The US economy grew strongly in the third quarter of 2023. (Source: AP)

However, the bank warned that a government shutdown could occur in 2024.

Goldman economists said the bank had initially predicted a shutdown of up to two to three weeks in the current quarter ending in December 2023, but that scenario now appears less likely.

Goldman Sachs said the conflict in the Middle East and other emerging geopolitical tensions will make the US Congress less likely to allow a government shutdown.

Goldman Sachs economists added that the election of Mike Johnson as Speaker of the House of Representatives also reduces the possibility of a government shutdown.

However, Goldman Sachs economist Jan Hatzius commented that there is still some risk of a government shutdown in early 2024 as a temporary extension of the spending bill before the November 17 deadline is expected to fail to resolve fundamental policy disagreements.

The longer the government operates under a short-term extension, the less likely it is that Congress will reach an agreement on a full-year spending bill, Hatzius said, so there is still some risk of a government shutdown in early 2024.

* According to data from the US Department of Commerce, the country's Gross Domestic Product (GDP) growth reached a rate of 4.9% in the third quarter of 2023 - the fastest rate since late 2021.

The latest GDP data is a fresh “bump” from the 2.1% growth in the second quarter of 2023 and much higher than the 4% expected by analysts.

The US Commerce Department said the GDP increase reflected increases in consumer spending, federal government spending and other factors.

Now, this strong growth figure has raised hopes that the country can reduce inflation without triggering a recession.

US Treasury Secretary Janet Yellen is optimistic about that possibility. But if the trend continues, policymakers may consider raising interest rates further to keep price increases from lasting.

Kathy Bostjancic, chief economist at financial services and insurance company Nationwide, predicts a “mild recession” in 2024, with the biggest downturn occurring in the second quarter of next year.

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