US government shutdown slowing economic growth

The longest-ever US government shutdown is damaging the world's largest economy and will lower growth in the first quarter of 2019, a Reuters poll of economists shows.

When asked how much of an impact the shutdown would have on US GDP for this quarter, the median was for a 0.3 percentage point trim. But forecasts ranged between 0.1 and 1.3 percentage points.

The poll of over 100 economists taken January 16-23 indicates that the US economy is expected to grow at a 2.1 percent annualized pace this quarter, down from 2.3 percent forecast last month.

Economic growth will grow 2.3 percent in the second quarter and then slow to 1.9 percent by the end of the year, the survey shows.

The poll is in line with a recent run of weaker US economic data pointing to rougher sledding for the economy this year than last year.

“If the shutdown were to last for the entire quarter, it could subtract around a full percentage point from Q1 inflation-adjusted output growth. In a worst-case scenario, real GDP could indeed contract in Q1 if this Congressional impasse remains unresolved,” said Brett Ryan, senior US economist at Deutsche Bank.

Over 80 percent of 52 economists who answered a separate question said a sell-off in financial markets and a sharper slowdown in the US economy pose the biggest challenges for the Fed in raising rates this year.

The partial government shutdown reached its 35th day on Friday, as Republican President Donald Trump and Democrats in Congress remain divided over Trump’s demand for $5.7 billion in partial funding for a wall along the US-Mexico border.

The government closure, which began on December 22, is the longest in history and 19th since the mid-1970s.

The current one has affected a quarter of federal agencies, including the Departments of Interior, Commerce, Homeland Security and Transportation, as well as NASA and the Internal Revenue Service (IRS).

Some 800,000 employees have been furloughed or are working without pay. Several million private contractors working for many government agencies are also without pay.

On Wednesday, about 500 government workers, union leaders and supporters gathered in the Hart Senate Office Building in Washington, DC, to protest — chanting phrases like “No more food banks, we need paychecks.”

The protest, led by union leaders from the National Federation of Federal Employees, is meant to draw attention to the plight of federal workers - many of whom have had to dig into their savings, take on side jobs and seek help from food banks and other charitable programs to stay afloat.