Government shutdown clouds economic outlook as labor market and trade risks continue
Due to the ongoing partial government shutdown, which was about to enter its fourth week at the time of this writing, reduced availability of economic data has created some limits to visibility. For research analysts and markets, it’s a double-whammy. Not only are data unavailable for direct use by analysts, but lack of data also creates limited visibility for the Fed, which means their analysis and outlook is delayed and unavailable for use by others. While many government-reported data points have been unavailable in October, we still have information and expectations.
Annualized real GDP growth in Q3 is expected to remain solid, and while the consensus is that it won’t reach the very impressive 3.8% that we saw in Q2, some analysts have it actually exceeding that pace. So far, the negative impact of tariffs on the economy has been more tame than originally expected.
Employment growth has slowed. This reality is not reflected in the headline unemployment number, because both labor demand and labor supply have eased simultaneously. The next FOMC meeting is on October 28-29. According to the minutes of the September meeting, “downside risks to employment had risen” and the September rate cut “reflected a shift in the balance of risks.” It remains likely that the FOMC will make another rate cut in October.
On the trade front, most partners appear to have accepted the new US trade policy outcomes, with the important exception of an ongoing and unpredictable trade relationship with China. President Trump has threatened 100% tariffs on Chinese goods beginning in November, if he and President Xi cannot come to a reasonable arrangement when they meet later this month. Chinese restrictions on rare earth metal exports and their lack of US soybean purchases this year have been key elements in the ongoing tension.
You can read more about Rabobank’s economic outlook broadly and for key food and agriculture segments in the North American Agribusiness Review.
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