With the partial U.S. government shutdown as a result of the standoff between President Donald Trump and congressional Democrats now in its fourth week and no clear end in sight, the economic costs are starting to add up and are expected to impact growth during the first quarter.
According to a report in Seeking Alpha that covers comments issued by financial firm PIMCO, the firm said its early forecast for real GDP growth in the U.S. is now 0.5 percent for the first three months of the year, which is significantly lower than the 3 percent growth seen in 2018. The report noted that while the shutdown on its own should only have a small impact on economic growth, that combined with other issues in the near term could put growth during the first quarter in trouble. Seeking Alpha warned that it would impact markets and make any Federal Reserve actions in regard to interest rates clearer. PIMCO noted that the estimates don’t include the indirect economic impact of shutdowns such as the drag on consumption and private wages and salaries.
“Our view is that a negotiated resolution between President Donald Trump and congressional Democrats is unlikely and that the president will ultimately declare an emergency under the 1976 National Emergencies Act, which would allow him to reappropriate already-allocated dollars toward building his desired wall on the southern border,” wrote PIMCO, according to Seeking Alpha. PIMCO acknowledged that the move would likely be contested and could be blocked by the courts — as well as anger Republicans who weren’t keen on executive overreach by past president Barack Obama. But it did say it could achieve two goals for President Trump: “it would show the president’s base of support that he is committed to building the border wall and will do anything to follow through on his promise, and it would allow him to reopen the government and therefore help mitigate any further political fallout.”