Economists Turn to Shutdown-Proof Reports With U.S. Data Delayed

(Bloomberg) -- The U.S. government shutdown has thrown some key economic measures into the dark, forcing analysts to focus on alternative data to gauge the effects of a trade war and the pace of growth in recent weeks.

The Commerce Department, which houses the statistics-issuing Census Bureau and Bureau of Economic Analysis, is among the agencies -- covering about 25 percent of government funding -- that lack approved spending. That puts on hold the November international-trade data originally scheduled for Tuesday morning in Washington, following the postponement of reports on factory orders, construction spending and new home sales.

While the Labor Department is funded and its releases such as last week’s employment report are proceeding as scheduled, analysts use the Commerce indicators to connect the dots on economic health. The partial shutdown is forcing analysts to get more creative, leaning more on reports such as business surveys and port-traffic data. It’s not just economists: Federal Reserve Bank of Atlanta President Raphael Bostic said Monday that the lack of some data will likely hinder the central bank in its decision making.

“We’re flying blind to a large extent. We can say what should be happening, but that’s not always what occurs in the data,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, who will be working on other research Tuesday morning instead of poring over data on the trade balance.

“The trends show a slowdown in both imports and exports long-term, but it’s hard to say in the absence of the data,” he said. “It’s a crucial part of the picture that we don’t have right now.”

The government shutdown -- now in its third week as President Donald Trump refuses to budge on his demand for funding of a U.S.-Mexico border wall -- has risked $200 million a day in government contracts, delayed pay for hundreds of thousands of Americans and threatened benefits for millions. The stakes may be lower for economic-data watchers, but the effects will increase as the shutdown drags on.

It’s a crucial time for trade in particular, as U.S. officials negotiate with Chinese officials in Beijing this week amid a 90-day tariff ceasefire. China has said it’s buying more American agricultural goods and economists expect companies in both countries to stock up on goods over the next few months, in anticipation of higher tariffs if there’s no resolution -- but it’s harder to measure without the U.S. numbers.

Other sources of information, including surveys and private-sector data, are becoming more important, according to analysts. They include trade figures and other economic data compiled by institutions such as the Organization for Economic Cooperation and Development, along with data from ports in the U.S. and abroad. There are also surveys by the Institute for Supply Management and quarterly earnings reports from large firms.

“We’ll have to rely on what we do have,” said Jennifer Lee, senior economist at Bank of Montreal. “The longer it drags on, the bigger the impact will be on investment and hiring decisions and because of that, the economy.”

A shutdown that extends into next week would likely delay reports including retail sales for December, which leaves analysts with private-sector figures such as those from Johnson Redbook Research to gauge the holiday-shopping season. Consumer spending accounts for about 70 percent of the economy.

As for the shutdown’s actual impact on growth, that’s likely to be fairly minimal, but will get bigger the longer it continues.

Kevin Hassett, chairman of the White House’s Council of Economic Advisers, said last week it would cut U.S. economic output by about 0.1 percent every two weeks. JPMorgan Chase & Co. analysts estimated that each week of the shutdown will shave as much as 0.2 percentage point off annualized gross domestic product growth, though that should reverse once the government reopened.

As for the Fed, MFR’s Shapiro said the lack of data means policy makers will spend more time on the ground speaking with their members. More broadly, the delays in key gauges of the economy are likely to make already-skittish markets more volatile.

“What happens in a vacuum is it gets filled with all sorts of stuff, and you have no idea of the quality,” he said. “And there’s already too much of that to begin with.”

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