Suspension of 737 MAX production expected to cut economic growth
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Boeing's plan to suspend production of its 737 MAX jets in January is expected to hit Q1 GDP growth, assuming the suspension lasts through the first quarter and that suppliers slow production.
By the numbers: Wall Street firms estimate the suspension could shave off as much as 0.6 percentage points from Q1 GDP.
- Per MarketWatch, economists “were penciling in a 1.3% annual growth rate for the first quarter before Boeing’s production plans were updated.”
- The expectation is that 737 production will eventually resume, making the GDP impact temporary. The question is how long Americans will have to wait for a bounce back.
Catch up quick: Boeing announced on Monday that the company would halt production of its 737s while it grapples with the ongoing issues that caused two fatal crashes and prompted the jet’s worldwide grounding. The company reduced production of the aircraft from 52 per month to 42 in April.
- Those prior production cuts have already eaten into economic growth.
- What they’re saying: “By our estimation, the halt in deliveries of the 737 MAX last March and the cut in production last April ... together lowered real GDP about $10 billion below baseline," according to analysts at IHS Markits, who estimate Boeing’s production halt could lower Q1 growth by a half percentage point.
Between the lines: Decelerated business for suppliers and manufacturers has been an immediate concern.
- Boeing says it will attempt to avoid completely disrupting supplier relationships, and the company may continue to accept parts while waiting to restart production.