Economy Watch: The Impasse Drags On
- Oct 07, 2013
The federal government shutdown continued throughout the weekend, though the House voted unanimously on Friday to pay furloughed government workers, who number about 800,000, for the time they’re spending furloughed. Also, the Pentagon unexpectedly announced that it was recalling most of its civilian workers this week, which will probably ease some of the impact of the shutdown.
The major U.S. economic data delayed—or possibly never to be released—because of the shutdown so far includes construction spending for August, which was expected to go up a little; factory orders for August, likewise expected to edge up a bit; and most notably, September’s unemployment numbers. As of August, the nation’s unemployment rate stood at 7.3 percent.
It’s possible that the shutdown—or more likely, loose talk about the United States deliberately defaulting on its sovereign debt—is giving investors around the world the jitters. For example, Japan’s Nikkei 225 dropped 1.1 percent on Monday in Asia, following a 5 percent decline last week, the largest weekly drop in about two months. European indexes, on the other hand, were generally up a little on Friday.
Also, the dollar was down 0.1 percent against the euro at $1.3572 on Friday, and down 0.4 percent against the yen to 97.05. Against a basket of major currencies, the dollar dropped 0.1 percent, to almost as low as it’s been this year. Gold, which has been taking a beating in recent months, edging up 0.1 percent on Friday to about $1,311.7 a troy ounce.
Despite the shutdown hubbub, Wall Street had an up day on Friday, with the Dow Jones Industrial Average rising 76.1 points, or 0.51 percent. The S&P 500 gained 0.71 percent and the Nasdaq advanced 0.89 percent.
Asian growth expected to slow
The World Bank has lowered its growth forecasts for most of East Asia, citing (among other factors) weak commodity prices. “Developing East Asia is expanding at a slower pace as China shifts from an export-oriented economy and focuses on domestic demand,” the development bank said in its latest East Asia Pacific Economic Update report, which was released on Monday.
The organization is now predicting that the economies of developing East Asia will expand by 7.1 percent this year and by 7.2 percent in 2014, down from its previous (April) estimate of 7.8 percent and 7.6 percent, respectively. “Growth in larger middle-income countries including Indonesia, Malaysia and Thailand is also softening in light of lower investment, lower global commodity prices and lower-than-expected growth of exports,” it added.
As for the behemoth Chinese economy, the World Bank now expects it to expand by 7.5 percent this year, down from its earlier forecast of 8.3 percent. “[The Chinese economy] has yet to make the decisive turn toward consumer-based growth,” the development bank noted.