Prolonged shutdown poses risk to the U.S. economy

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The paralysis triggered by the U.S. 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 blame game between President Donald Trump and Democrats in Congress, the publication and recording of statistical indicators are being delayed. The release of data on new home sales is the only indicator to have been delayed so far.

But if the shutdown is still in effect after January 1, it could impact the release of figures on construction expenses, including industrial orders and trade. Figures on trade are due on January 8 and are critical for markets just as the Trump administration is involved in a full-fledged trade war with some U.S. 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 Labor Department still has funds to keep running its operations.

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

"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," said Grant Thornton chief economist Diane Swonk in a tweet.

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.

Source(s): AFP