Shutdown Revives Sense of Uncertainty about Health of U.S. Economy

Impacts from the shutdown will likely continue to be felt for several months.
PublicPolicy-blog

Even if the latest proposal from the U.S. Senate passes through the House, it will likely take some time for the economy to return to "normal." The problems created by the government shutdown go far beyond people not working and people not getting paychecks. Research projects around the world have been put on hold and will take time to restart, and agencies that had backlogs going into the shutdown will likely see those increase.

Manufacturers and distributors who rely on government contracts may have to wait a while after the restart to see those orders actually pick up again.

In my conversations with distributors and manufacturers over the past few weeks, I've heard anecdotes about how orders from contracts that were awarded well before the shutdown were delayed in anticipation of the shutdown – meaning orders that were expected in the third quarter still haven't come through, and there's no word on when they actually will.

The awarding of new contracts, from construction to defense, were also put on hold for the most part, causing delays for manufacturers and distributors bidding on those projects.

But perhaps the biggest long-term impact of the shutdown is that it revives the sense of uncertainty about the health of the U.S. economy and the role that Washington is playing. In the third-quarter MDM-Baird Distribution Survey, respondents were asked about their biggest policy or regulatory concerns for business (excluding the Affordable Care Act). Several highlighted fears around political instability. "This whole issue of shutting down the government creates uncertainty which causes our customers to pull back in their growth plans," wrote one respondent.

Even if the current proposal passes (which at this time it is expected to do), its temporary nature – it funds the government through Jan. 15, 2014, and allows for continued borrowing to pay the nation's bills, including debt payments, through Feb. 7, 2014 – isn't likely to alleviate those concerns anytime soon.

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