Government Shutdown To Hurt Q1 GDP Growth By 0.4%

Government Shutdown - Potential Effects

The government shutdown might resume on February 15th.

As for now, the CBO released the potential effects from the shutdown on past and future GDP growth. Negative impact on Q4 GDP growth will be 0.2% and the negative impact on Q1 will be 0.4%.

Government Shutdown - Reports Still Delayed

It’s very important to be careful when reviewing GDP effects from the shutdown. Some economists are acting as if 2% growth in Q1 is likely. They take 0.4% off the 2% estimate and call that the final estimate.

That’s way off because we don’t have the complete data picture from November and December, let alone information about Q1. The median estimate from the CNBC rapid update shows Q4 growth will be 2.9%. These estimates will all change upon the release of the delayed November and December data.

BEA stated it is working with the Office of Management and Budget to get its economic reports out. Q4 GDP report, Q3 GDP by state, December personal income and outlays will be delayed. Also, December international trade in goods and services reports will be delayed.

New release dates for the Q3 U.S. international investment position, November international trade in goods and services, and Q3 GDP by industry reports will be set.

It would be unfortunate if the government shuts down again just as the BEA works through its new schedule of release dates.

It’s important to recognize fund managers are getting private reports on the economy which help them make trades.

Government Shutdown - Stocks will still react to the economic reports when they come out.

Private estimates of government economic reports always exist. But stocks still react to the government reports. It could be algorithms reacting to the headlines.

Either way, they still matter. I use the government reports to color my thinking on the economy.

Government Shutdown - Firms Are Mentioning The Shutdown

The chart below shows 28 firms in the S&P 500 have mentioned the government shutdown on their earnings calls. Only 15 of them said it is having a negative effect on business.

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