US government shutdown to hit US Q1 growth, recession risk steady - Reuters poll

According to the latest Reuters poll of more than 100 economists conducted during Jan 16-23, the longest-ever US government shutdown is likely to have a big hit on the US economic growth in the first quarter of 2019, but the risk of a recession remains steady.

Key Findings:

“The probability of a U.S. recession in the next 12 months held steady from last month at 20 percent.

The chance of a recession in the next two years was also steady at a median 40 percent.

Nearly 60 percent of about 50 economists who answered an additional question said the shutdown will have a significant impact on first quarter gross domestic product growth.

When asked how much of an impact the shutdown would have on U.S. 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.

Analysts expected the U.S. economy to grow at a 2.1 percent annualized pace this quarter, down from 2.3 percent forecast last month, followed by 2.3 percent in the second quarter and then slowing to 1.9 percent by the end of the year.

The latest survey still predicted two rate hikes in 2019, in line with the December poll and the Fed’s own dot-plots. However, economists now expect the Fed to take rates higher in the second quarter instead of the first quarter, as predicted in the previous poll.

But nearly one-third of 105 economists predicted the U.S. central bank would either hike rates only once or keep the fed funds rate unchanged at 2.25-2.50 percent in 2019. That was notably higher than the 11 of 101 respondents in the previous poll.

Traders of U.S. short-term interest-rate futures expect no rate hikes in 2019.”