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US Government Shutdown: Economists surveyed see GDP impact as minor



The negative impact of the US government shutdown on economic growth is likely to be somewhat smaller than expected, according to a survey of prominent economists undertaken by Bloomberg.

Bloomberg asked 30 economists for their forecasts of the impact on growth of the shutdown, with the average expectation being that it lowers GDP growth by 0.32 percentage points (pp) in the first quarter.

At the extremes of Bloomberg’s survey, one economist expected GDP growth to be cut by 1.2 percentage points, while the most optimistic forecaster said growth would shrink just 0.05 pp.

The average of forecasts for total growth in the first quarter was an annualized 2.3%. Although not yet released, annualized growth in the fourth quarter of 2018 is expected to have been around 2.7%.

The forecasts of economists polled by Bloomberg contradict that of the White House Council of Economic Advisers, which estimated this week that the negative impact on growth is likely to be around 0.13 percentage points per week of the shutdown.

With the shutdown already 28 days long, that means a minimum of more than 0.5 percentage points knocked off growth.

White House forecasters initially expected an impact of 0.05 percentage points per week, accounting for the lost productivity from 380,000 federal workers placed on furlough.

This week’s update, however, included the downsides caused by the loss of revenue to federal contractors (third-party companies that are paid by the shut down agencies for services), according to a White House official who spoke to Business Insider’s Bob Bryan.

Read more:The government shutdown threatens the US with a credit-rating cut for only the 2nd time in history

Bloomberg’s poll saw 94% of economists predict the shutdown will be over by February 14, with just over one-third expecting it to be over by the end of January. One economist expected the shutdown to last until March.

At 28 days long, the shutdown is now the longest in US history by exactly one week, surpassing the 21 day shutdown witnessed during 1995-1996 under the Clinton administration.

The impasse between President Donald Trump and the Democratic Party shows no signs of abating, with both sides seemingly unwilling to compromise over funding for Trump’s proposed border wall with Mexico.

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