US: Growth risks moving to the downside - ING

Analysts at ING are suggesting that the US growth risks are moving to the downside as the additional headwind of the government shutdown coupled with fears that the lack of bi-partisanship in Washington will lead to more political stand-offs.

Key Quotes

“Just in terms of 1Q GDP growth, we predict 1.7% annualised, which would be the weakest quarter of growth since 1Q 2016. This further reinforces our view that the Federal Reserve will not raise interest rates in the current quarter.”

“Pressure will only intensify on politicians to come up with a deal to bring an end to the economic hardship being faced by so many federal employees so we remain optimistic that a positive outcome will be achieved in coming weeks. The hope is that the lessons learned from this event may also incentivise politicians to work together in a more bi-partisan manner on future issues including the debt ceiling.”

“Once normality resumes the federal workers will receive back pay while the backlog of work could lead to more recruitment in the sectors affected. This should see activity rebound given the firm underlying fundamentals in the US economy. With record employment and rising wage pressures, we continue to look for additional rate hikes from the Federal Reserve this summer.”