The longer the month-old partial government shutdown drags on, the harder it gets to figure out what the heck is going on in the economy.
Key reports on U.S. retail sales and home building have already been postponed. And now Wall Street is about to miss out on fresh figures for new home sales and spending on big-ticket durable goods.
“We don’t know if the economy is slowing down or speeding up,” noted senior economist Sam Bullard at Wells Fargo.
The avalanche of delays comes at a sensitive time.
Fears of a pending recession sent stocks
plunging in December, and even though prices are recovering, the worries linger. The global economy has weakened and most forecasters think the U.S. will downshift in 2019 as well.
The Federal Reserve got so alarmed that top central bankers have rushed to soothe investors with new vows to go slow on raising interest rates.
“Growth is slowing everywhere, but it is far too soon to run for the exits,” economists Nariman Behravesh and Sara Johnson at IHS Markit told clients.
The White House, meanwhile, is still engaged in high-stakes talks with the Chinese to resolve a festering dispute over trade that’s damaged exports and harmed U.S. corporate profits. The dispute is making America’s CEOs especially anxious.
The economy also tends to weaken in the first quarter as Americans take a breather following the holidays. The most recent holiday season may have been the strongest in years in terms of consumer spending.
On top of all that, the government shutdown is taking a bigger bite out of the economy.
Some analysts suggest that every week it goes on, gross domestic product loses a tenth of a percentage point. It might not sound like much, but it adds up over time and raises the odds of the economy contracting in the first quarter for the first time in five years. Macroeconomic Advisers on Friday downgraded its assessment of first-quarter GDP to 1.4%, a decline of two-tenths.
To be sure, all of these missing government reports are for December. They would have revealed more about how the economy stood at the end of 2018 than how it’s doing now. But it certainly isn’t helping economists to figure out the trend.
One of the saving graces is that the Labor Department and Federal Reserve are still open and pumping out the information investors crave.
Initial jobless claims recorded by the states, for example, have receded in January after a big spike from mid-November to early December. That’s suggests the shutdown has not damaged the broader economy all that much — so far. The Fed on Friday reported a rise in industrial production during December, notably from manufacturing that was the strongest in 10 months.
The same can’t be said for government workers. More and more are applying for benefits to tide them over until the shutdown ends and they get back pay.
The Fed, for its part, is out in full force. Senior officials have given a number of speeches in the past two weeks reaffirming their plan to be “patient” in raising U.S. interest rates.
Fed leaders also say the economy is still on sound footing, but they are worried about the impact of the shutdown. The central bank’s so-called Beige Book found that political uncertainty has contributed to declining confidence among made business leaders in early January.
“The one thing that has been beneficial is that we have seen a lot of Fed officials come out and speak,” Bullard said. “They have a lot of business contacts.”
In the meantime, Wall Street economists will have to make do with a smattering of second- and third-tier reports that originate in the private sector.
It ain’t much, but it’s better than nothing.