Yesterday (June 26, 2013), the – US Bureau of Economic Analysis – published the third estimates (revising the second estimates published in late April – US National Income and Product Accounts – for the March-quarter 2013. The substantive changes in the revisions are that the US economic growth rate has been revised down from 2.4 per cent to 1.8 per cent per annum once the more complete data has become available. Personal consumption spending has been revised downwards, and exports declined rather than the initial assessment of an increase. The second estimates revealed a slowing economy in the face of the fiscal drag coming from the government sector, principally the federal government. At the time of their publication, it was clear that the outlook was not optimistic given that this data seemed to exclude the impacts of the “sequester”. We considered that those impacts would manifest more clearly in the June-quarter data. The third estimates now confirm that the lag in the sequester impacts has been shorter than previously thought. The US economy clearly slowed quite sharply in the first-quarter 2013 under the weight of the fiscal drag. The output gap is now over 10 per cent with signs of deflation emerging. The danger is that the US will head towards zero growth as the sequester impacts become more pronounced. The US federal government should increase their net spending rather significantly at present to avoid this downward trend. The US just has to look across the Atlantic, where the data now shows the French economy is now back in recession as a direct result of fiscal austerity.