The US is braced for across-the-board public spending cuts due to hit on Friday, as new growth data showed the economy was highly vulnerable to reductions in government outlays.
The onset of sequestration – which will hit everything from housing vouchers to naval shipbuilding with $85bn in cuts for the rest of this year – threatens growth in the US and globally. It would mark the first time in three years of budget battles that Barack Obama, the US president, has failed to reach a last-minute compromise with Republicans in Congress.
The International Monetary Fund warned that it would cut its growth forecast for the US as the non-partisan Congressional Budget Office said growth would be 0.6 percentage points slower because of sequestration. The CBO said there would be 750,000 fewer jobs at the end of 2013 if sequestration remained in place.