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Kudlow: Govt Shutdown Will Cause Glitch in Economic Data

(Getty/Saul Loeb)

By    |   Friday, 18 January 2019 07:07 PM

National Economic Council Director Larry Kudlow has warned there will be a temporary glitch in economic data due to the government shutdown, CNBC reported.

CNBC’s Eamon Javers reported that Kudlow insisted the economy is still “doing very well” despite the partial government shutdown. The US economy will “beat 3 percent GDP in the fourth quarter,” CNBC quoted Kudlow, the head of the National Economic Council that advises President Donald Trump, as saying.

As means of comparison, the Atlanta Federal Reserve’s most recent GDPNow forecast model showed on Wednesday that the U.S. economy is expanding at a 2.8 percent annualized rate in the fourth quarter, based on data on export and import prices in December.

CNBC also reported the veteran financial guru and former Ronald Reagan adviser said that Trump hates stories of hardship among federal employees who have missed a paycheck, but the commander-in-chief believes he “is doing the right thing” in fighting for a wall and border security.

Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985, is also confident “calmer heads will ultimately prevail” and reach a compromise to reopen the government.

CNBC reported Kudlow, who served as the Trump campaign's senior economic adviser, speculates perhaps the U.S. should “get rid” of the nation’s debt ceiling since talks on that looming crisis could possibly end up in another standoff.

Meanwhile, Bloomberg reported that for all the hand-wringing and headlines over the fallout of the U.S. government shutdown, most forecasters still don’t expect it to cause too much pain to the economy so long as it doesn’t endure.

Analysts project the government will reopen by mid-February, though if the closure lasts through March, the disruption will cause economic growth to dip below 2 percent this quarter, according to the median forecast in a Jan. 15-17 Bloomberg survey. At the same time, just under half say the government impasse increases the probability of a recession this year.

The relatively sanguine assessment is at odds with some more-dire recent predictions, including by Deutsche Bank AG, and the White House itself doubled the estimated negative fallout. Even so, the shutdown adds risk at a time when the economy is already projected to slow, forecasters see the highest recession risk in six years, manufacturing is faltering and consumers and investors are getting more skittish.

“If the shutdown keeps going on throughout the first quarter, it’ll be costly for growth,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics Inc. While it probably won’t end the expansion given the momentum at the start of the year, “it could leave a more lasting impression, weighing on business confidence, consumer sentiment and investor confidence.”

A separate Bloomberg survey earlier this month showed economists raised the probability of a recession in the next 12 months to 25 percent, the highest in more than six years, amid the shutdown and trade war. A Federal Reserve Bank of New York gauge put the chance at 21 percent a year from now, the highest since 2008.

In the first quarter, the shutdown will shave 0.25 percentage point from economic growth, according to the median of 30 responses in the survey. A slight majority of forecasters also said the full-year pace of expansion will be affected. Among those who do expect an impact, 2019 growth will be cut 0.13 percentage point, according to the median estimate.

Material from Bloomberg and Reuters was used in this report.

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National Economic Council Director Larry Kudlow has warned there will be a temporary glitch in economic data due to the government shutdown, CNBC reported.
kudlow, shutdown, economic, data
Friday, 18 January 2019 07:07 PM
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