Cookie Notice: This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. Please read our Cookie Notice for more information on the cookies we use.

Skip to Content
Although a deal was reached to re-open the Federal government, questions remain about the economic impact of the shutdown.

uncertainty in near term chart

The temporary closure of select parts of the Federal government ended on Friday, January 25. Still, questions remain about the impact of that shutdown on the economy and what it means for first quarter growth. The first official estimate for Q1 Gross Domestic Product won’t be released until late April, but the effects are already being felt in some data.

The effect is illustrated poignantly above. Unsurprisingly, the Economic Policy Uncertainty Index (which is constructed using data from various large newspapers, the Congressional Budget Office, and the Federal Reserve Bank of Philadelphia) spiked in tandem with the government shutdown. At the same time, the Conference Board’s Consumer Confidence Index experienced large declines in the past two months. In the accompanying press release, the shutdown was specifically noted as a partial cause identified by survey respondents, while also acknowledging that “shock events such as government shutdowns tend to have sharp, but temporary, impacts on consumer confidence.”

Some economists have estimated that the shutdown could trim growth in the first quarter by as much as 0.5%, due to the direct negative impact on furloughed workers, the secondary (but real) effect on consumer confidence, and the resulting combined impact on spending.

Even so, the economy itself appears to still be growing at a solid pace, sufficient to support strong job creation and a consumer sector that remains generally upbeat on the economy despite the short-term negative impact of the situation in Washington D.C. In short, the shutdown represented a headwind to the economy, but not one that was sufficient to knock it off course.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.