GM Strike Expected to Reduce Economic Growth

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WASHINGTON (Bloomberg) -- A strike at General Motors will probably pare U.S. economic growth by about half a percentage point this quarter, now that the world's largest automaker has been forced to shut down most of its North American assembly plants.

GM accounts for more than 1 percent of all U.S. output, and with much of that halted by the 17-day-old strike, gross domestic product, industrial production and factory hours will all be lower this quarter than previously thought.

A drop in GM jobs will also cut into the nation's employment figures. "The strike is going to have some restraining impact on the economy, and it further reduces the risk of any overheating in June or July," said William Sullivan, chief money market economist at Morgan Stanley Dean Witter in New York. Still, while the GM strike will slow growth this quarter, the effects will probably be transitory, and growth could rebound in the third quarter. "As soon as a company comes back (from a strike) they try to recoup as quickly as possible with overtime and extra shifts," said Diane Swonk, deputy chief economist at First Chicago. "Also, the competition tries to pick up as much business as it can." Strikes at two GM parts plants have shut all or parts of 24 assembly factories, idling 122,400 workers and halting 93 percent of production. …


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