U.S. state and local economies will grow more slowly next year than previously estimated in part because of bigger spending reductions from the federal government, according to Standard & Poor’s.
The nation’s economy will expand at a 1.8 percent pace in 2013, less than the 2 percent predicted in July, the New York-based ratings company said in a report released Tuesday. That’s as federal spending will fall by 3.2 percent next year, up from an earlier projection of 3 percent.
States and cities cut 3.2 percent of their payrolls since August 2008 amid the worst recession since the 1930s. There’s a 25 percent chance of another slowdown within the next year, according to S&P.
“Our extended forecast horizon, which looks at economic prospects for 2013, shows an economy poised for even slower growth overall,” S&P analysts including Gabriel Petek said in the report.
“Those governments with limited revenue-raising ability, greater economic reliance on exports, and greater economic or fiscal reliance on federal spending would be most affected.”
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