Prolonged US shutdown threatens to unsettle economy

Thousands of government workers are forced to stay home or work without pay due to budget shortages that are also hampering the publication of certain government indicators.

03 January 2019 | Economics

The impasse is already cutting into the supply of something that is essential to just about every market out there: federal economic data. – Diane Swonk, Chief Economist: Grant Thornton

Virginie Montet - The paralysis triggered by the US government shutdown could have unexpected consequences, such as muddying economic statistics just as the markets are extremely reactive to any whiff of uncertainty.

More than a week into the game of chicken between president Donald Trump and Democrats in Congress, the publication and recording of statistical indicators are being delayed.

With the lack of an agreement on Trump's much-promised wall on the border with Mexico, thousands of government workers are forced to stay home or work without pay due to budget shortages that are also hampering the publication of certain government indicators.

"There will be no lockups for Census or BEA (Bureau of Economic Analysis) and no posting of lockup data from either of those organisations because of the government shutdown affecting those agencies," said Labour Department spokeswoman Suzanne Bohnert, whose agency oversees the release of those indicators under embargo.

The release of data on new home sales is so far the only indicator to have been delayed.

But if the shutdown is still in effect after January 1, it could impact the release of figures on construction expenses, such as industrial orders, and on trade - due January 8 - which is critical for markets just as the Trump administration is involved in a full-fledged trade war with some US allies.

The closely watched employment figures for November, usually published the first Friday of the month, are set to be released on January 4 on schedule because the Labour Department still has funds to keep running its operations.

Markets

In addition to the publication of data, the very process of collecting this information is also beginning to be compromised.

"Odds are that it'll continue into January," Grant Thornton chief economist Diane Swonk said in a tweet.

"The impasse is already cutting into the supply of something that is essential to just about every market out there: federal economic data. That could have an impact on markets going forward and also what the Federal Reserve decides to do with interest rates in 2019."

With financial markets already extremely volatile and amid worries over tariffs with China and the Fed's monetary policy, the shutdown could add yet another layer of uncertainty.

Impact

The partial paralysis of administrative services will likely only have a mildly negative impact on economic growth, even though it's more tangible in the US capital, where affected government workers won't get paid.

"Thousands of federal workers would either be furloughed or work without pay for the duration of the shutdown," Oxford Economics said.

"While the economic impact of two-week partial shutdown would be minimal - less than 0.1% of GDP growth - it would add political uncertainty at an inopportune time.

"Among other things, a shutdown would affect the release of economic indicators and disrupt the start of the 2019 tax filing season."

Washington Mayor Muriel Bowser urged Trump to find a solution to end the stalemate, noting the capital's 170 000 federal workers "pay the highest price."

These furloughs also have unexpected consequences for the private sector.

On Friday, the National Association of Realtors expressed concern about the shutdown's impact on home sales.

"Very disappointingly, flood insurance has not been available during the government shutdown ... which means that roughly 40 000 homes may not get transacted because it requires flood insurance in order to get a mortgage," NAR chief economist Lawrence Yun said.

"Any time there is a government shutdown, consumer confidence may be dampened, so even if they have the cash, they may not spend the money, and that will hold back economic growth, so it's bad news all around." – Nampa/AFP

Similar News

 

Upbeat Calle preaches recovery

7 hours ago | Economics

Finance minister Calle Schlettwein says the domestic economy is projected to gradually emerge from the recession in 2020 with a moderate growth rate of about...

Stable Botswana to vote in rare cliffhanger

7 hours ago | Economics

Susan Njanji - Botswana votes today in the most closely fought general election in the history of the Southern African country, long known as...

In Putin’s own words

7 hours ago | Economics

The Russian news agency TASS conducted an interview with president Vladimir Putin ahead of the Russia-Africa Summit, a copy of which was provided to Business7...

Summit showcases growing clout

7 hours ago | Economics

Thibaut Marchand - President Vladimir Putin has called the first ever summit with dozens of African leaders "unprecedented" as Sochi prepared to host over 3...

Oil, diamonds and nuclear power

7 hours ago | Economics

Moscow - While Russia has traditionally focused on arms and grain exports to Africa, it is now looking to broaden its activities and influence.Here are...

For Russian business, big dreams in Africa

7 hours ago | Economics

Andrea Palasciano - From diamonds and arms to nuclear power and oil, Russia has major business ambitions in Africa, even if it is coming late...

Calle's nasty tightrope walk

1 day - 22 October 2019 | Economics

Finance minister Calle Schlettwein, who will present his midterm budget review in the National Assembly today, once again faces an unenviable task, according to analysts....

Inflation slows to 3.3%

1 week ago - 15 October 2019 | Economics

Annual overall inflation in Namibia in September was 3.3%, down from 3.7% the previous month and significantly below the 4.8% of September 2018.Figures released by...

Pirate products crackdown

1 week ago - 14 October 2019 | Economics

The ministry of finance says it will intensify the enforcement of the law on the clearance of imports to ensure compliance with intellectual property rights...

Driving investment (away)

2 weeks ago - 09 October 2019 | Economics

Jo-Maré Duddy To rekindle economic growth and drag Namibia out of its prolonged recession, the country needs “a dramatic change of policy, away from inward...

Latest News

Upbeat Calle preaches recovery

7 hours ago | Economics

Finance minister Calle Schlettwein says the domestic economy is projected to gradually emerge from the recession in 2020 with a moderate growth rate of about...

Shanghala plays the artful dodger

7 hours ago | Politics

CATHERINE SASMAN Justice minister Sacky Shanghala, who is alleged to have booked out electronic voting machines (EVMs) that have been missing since...

ACC probes exam 'cheating'

7 hours ago | Health

The Health Professions Council of Namibia (HPCNA) has roped in the services of the Anti-Corruption Commission (ACC) to investigate allegations that cheating had rocked the...

O&L/Dinapama deal commendable

7 hours ago | Columns

The Ohlthaver & List (O&L) Group recently procured casual corporate golf shirts for its 6 000 employees from local manufacturer Dinapama. This is no ordinary...

Stable Botswana to vote in...

7 hours ago | Economics

Susan Njanji - Botswana votes today in the most closely fought general election in the history of the Southern African country, long known as...

Geingob off to Sochi

7 hours ago | International

President Hage Geingob has left for Russia to attend the first session of the Russia-Africa Summit in Sochi tomorrow.The summit is expected to be attended...

Life for plotting husband's murder

7 hours ago | Justice

Rachel Rittmann (49), who arranged the murder of her husband Rudolph Rittmann (34) for financial gain and freedom to continue a love affair, was sentenced...

In Putin’s own words

7 hours ago | Economics

The Russian news agency TASS conducted an interview with president Vladimir Putin ahead of the Russia-Africa Summit, a copy of which was provided to Business7...

Summit showcases growing clout

7 hours ago | Economics

Thibaut Marchand - President Vladimir Putin has called the first ever summit with dozens of African leaders "unprecedented" as Sochi prepared to host over 3...

Load More