Shutdown hits GDP and growth forecasts for U.S. banks

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  • Lower GDP growth predicted
  • Government shutdown to blame
  • Feb 15 date for next development

The partial U.S. government shutdown’s effects on growth in gross domestic product in the first quarter will lead to a downgrade of 0.2 percentage points, according to Bank of America economists.

Last Friday, the bank cut its forecast for first-quarter GDP to an annual rate of 2%, and Barclays research also reduced its forecast for growth.

Michael Gapen was among the economists who wrote in a note: “We have revised down our US forecast for Q1 real GDP growth by 0.5pp to 2.5% q/q saar as the shutdown there takes hold and additional indirect effects pile up.”

The analysis came before President Donald Trump made what many are claiming to be a climb-down over the dispute that began over his insistence on $5.7 billion in government funding for the proposed U.S. border wall with Mexico.

After 35 days, Trump announced that he backed a deal to fund federal agencies for three weeks, but this does not include any of the money he demanded for the wall. He had previously vowed to reject any budget that did not include these funds.

The Senate and House unanimously passed a bill on Friday to temporarily end the shutdown, and the President subsequently signed the bill into law.

Trump tweeted that his decision was “in no way a concession” and said that he was “taking care of the millions of people who were getting badly hurt by the shutdown.”

The agreement will fund the government until February 15. Speaking in the White House Rose Garden, Trump said: “If we don’t get a fair deal from Congress, the government will either shut down on February 15 again, or I will use the powers afforded to me under the laws and the constitution of the United States to address this emergency.”

Brian Ducey

Brian graduated from Chaminade High School and the University Of Vermont Kalkin School Of Business with a concentration in Finance. He began his career with Knight Capital Markets, working his way to market maker. Brian later expanded his market repertoire, working with various sell-side research brokerage firms, such as Sidoti & Co., and William O’Neill & Co., as an Account Executive. With over 20 years-experience in the financial industry, Brian has built a unique perspective into “market intelligence” understanding an ability to read the tape and apply second level thinking in a fast paced environment. Brian also carried several market licenses, including the series 7, 24, 55, 65, and 63 licenses as well as previously passing The Connecticut Life and Health Insurance Exam