News & Resources

Jury's out on whether partisan impasse will impact U.S. credit rating

Nov 28, 2011 Walt Wojoiechowski

The U.S. Department of Commerce scaled back its projection of third-quarter economic growth on Tuesday, prompting markets to tumble and renewing fears of a deteriorating economy. A massive drop in after-tax incomes only exacerbated the concerns. Specifically, officials revised July-September GDP growth down to 2 percent, having been estimated at 2.5 percent in October. Other data, however, showed consistent gains in consumer spending and a reduction in business inventories, providing enough evidence that the economy will maintain stronger growth through the fourth quarter. Nonetheless, the U.S. government's inability to reach a deficit reduction deal have prompted fears of another downgrade of U.S. credit. "After the market closed Monday, the major agencies said the country's credit rating was unaffected by the news, but Standard & Poor's also said its current rating is based on the expectation that automatic cuts will start in 2013," reports The Associated Press. "Some Republicans have said they would block the defense spending cuts." As retail spending has already begun its uptick in response to the holiday shopping season, investors may enjoy a brief swell in activity from their credit decisions.