For the first time in a long period, the United States federal shutdown is introducing a significant absence of important economic indicators like employment data and measures of inflation. With federal agencies like the Bureau of Labor Statistics suspended in their operations, it has disrupted the flow of macroeconomic data. Otherwise, investors and economists would refer to a “data void” — a bit of uncertainty that makes risk assessment and decision-making very slow. In the absence of this official information, markets are increasingly using alternative signals and private data to get an estimate of the overall economic picture.
Central Bank Flying Blind
The Federal Reserve is uniquely vulnerable to fallout. Monetary policy decisions have historically relied on the timely release of reports such as non-farm payrolls, CPI, and GDP. In the absence of timely reports, central bankers are typically forced to rely on internal surveys as well as unconventional or alternative sources of data. The lack of clarity has increased caution among major policymakers in the Fed with some advocating to slow the pace of interest rate cuts. In summary, the Fed is operating somewhat unable to see the whole table with barely, if not at all, reliable data making it difficult to drive the economy without hesitation.
Catch-Up or Permanent Loss?
Although the government is open again, complete recovery of lost data may not be possible. Some delayed reports could be published retroactively, but others — especially the October jobs and inflation numbers — may be lost forever. Analysts caution that all the data could start coming back at once, leading to a dramatic repricing in the market. The risk is not just a short-term repricing; there is a genuine risk that the statistical system has been permanently “broken,” damaging confidence in economic reporting indefinitely. click here for the source
