If the United Auto Workers (UAW) launches a full-scale strike against the Big Three automakers and it lasts through the end of the year, economic growth could come to a “virtual standstill” during the fourth quarter, according to Moody’s Analytics chief economist Mark Zandi.
The unprecedented strike entered day four on Monday and negotiations on a deal are ongoing.
A full-scale UAW strike that lasts six weeks would reduce annualized GDP growth in the fourth quarter by an estimated 0.2%, Zandi told CNN in an email.
“This is a small impact, but meaningful, particularly in the context of other potential headwinds to growth in coming months,” Zandi said.
Given those obstacles and the UAW strike, Moody’s Analytics is projecting GDP will grow at an annual rate of just 0.8% in the fourth quarter.
“Real GDP would flatline in the fourth quarter if the UAW strikes the three automakers for the entire fourth quarter and all other assumptions hold,” Zandi said.
Another impact: A long strike would reduce low vehicle inventories.
Zandi said this will “forestall additional vehicle price declines, and even potentially push prices up, stymying the current disinflation and putting added pressure on the Fed.”
S&P Global Market Intelligence is warning of an even bigger hit to GDP of up to 2.17 percentage points in the fourth quarter if the strike lasts 15 weeks.
“A lasting strike…is looking highly probable,” S&P analysts wrote in a report on Monday. “The current political and economic conditions increase the odds of a longer strike.”
UAW President Shawn Fain warned over the weekend the union is prepared to escalate the strike.
“If we don’t get better offers, and we don’t get down to taking care of the members’ needs, then we’re going to amp this thing up even more,” Fain told CBS News.