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Positive Fiscal Impulse Seen Shortly Turning To A Drag [4/4]

MACRO ANALYSIS
  • We have touched upon potential private sector growth drivers above but the public sector is also of note after what has been a period of historically strong real government spending growth (including 3.9% Y/Y in Q1).
  • Via Brookings, the Hutchins Center fiscal impulse estimates peaked with a positive contribution worth almost 0.5pp to real GDP growth from the direct net spending impact from federal and state & local governments over a four-quarter basis.
  • That is then forecast to be broadly neutral by mid-2024 before a drag worth circa 0.25pp from GDP growth in early to mid-2025.

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