Feb 6, 2019

The lingering effects of the shutdown on economic data

Illustration: Rebecca Zisser/Axios

The economy is slowing down. But no one is entirely sure by how much.

The big picture: It's been harder than usual to determine for the U.S. because the 35-day government shutdown pushed back or halted important economic releases that inform policymakers and market participants.

Driving the news: This short week has already produced some less-than-stellar shutdown-delayed data points.

  • The November reading of U.S. factory orders was -0.6%, missing expectations by almost a full percentage point.
  • November's durable goods orders also missed economists' expectations by nearly a percentage point.
  • Both surveys were released on Monday, 2 months behind schedule.

Tuesday's reading on the health of the consumer sector, the ISM non-manufacturing index, was the lowest since July.

  • Employment rose but business activity was one-and-a-half points lower, new orders fell to the lowest in 13 months and new export orders fell 9 points to the lowest in 2 years.

What they're saying: "It's possible, if not likely, that the economy weakened during the shutdown and the data that would have given us a heads up on the turn in the economy was unreported because of the shutdown," Lou Brien, market strategist at DRW Trading tells Axios.

Remember: Consumer sentiment data has been substantially weaker of late, and as Charles Schwab fixed income analyst Kathy Jones noted yesterday, it can take 3–6 months for economic data to catch up to sentiment.

  • "The more the hard data softens or gets weaker the more concerned we get," Jones says.

For now, anxious investors are left waiting for data like factory orders, home sales, business inventories and international trade figures from November and December.

  • The December retail sales report, tracking the health of the American consumer during the crucial Christmas holiday shopping season won't be released at all because of the shutdown.
  • The advance economic indicators report for November also has been canceled,

Be smart: New dates have yet to be announced for the advance fourth quarter GDP report, December personal income and spending data and the December international trade report.

  • "Some of the recent private sector data was notably weak and now we wait for the government statistics to catch up and reveal a fuller description of the economy," Brien said.
  • "We need more data and time to see if this is a wiggle or a new trend."

Go deeper: The shutdown's effect on economic data

Go deeper