Boeing's 737 Max Crisis Could Impact US GDP Growth In 2020: Mnuchin

Boeing Co.’s BA 737 Max crisis is affecting the United States economy and could hold back this year’s GDP growth, Treasury Secretary Steve Mnuchin said in a weekend TV appearance. 

Mnuchin Projects 50-Basis Point Impact

The delay of Boeing’s 737 MAX aircraft production could slow down U.S. GDP growth by half a point this year, Mnuchin said in an interview with Fox News on Sunday.

“Boeing is one of the largest exporters, and with the 737 Max, I think that could impact GDP as much as 50 basis points this year,” he said. 

Mnuchin still expects the economy to grow by about 2.5% this year.

"For this year, we've been looking at 2.5 to 3%, as I said, it may be closer to 2.5 because of the adjustment of the Boeing numbers." 

The figure would have been 3% otherwise, the Trump cabinet member said. 

"There's no question that USMCA and the China deal are going to add significantly to growth."

737 Max Grounded For 10 Months

The United States grounded Boeing’s best-selling aircraft 737 MAX in March 2019 following two fatal crashes that killed a total of 346 people.

Boeing, however, continued to produce 737 MAX aircraft even as deliveries were frozen in March, resulting in a surge in aircraft inventory that helped offset the slowdown on GDP growth.

In December, Boeing announced its plans to suspend production of 737 Max.

At the time, economists said Boeing’s decision stop production of 737 Max could hold back U.S. GDP growth by at least half a percentage point in the first quarter of 2020.

“The decision to stop producing means that the surge in inventories will end, resulting in a big drag on economic growth in the first quarter,” Michael Pearce, a senior U.S. economist at Capital Economics, said at the time.

Boeing Price Action

Boeing shares declined 1.91% to close at $329.92 on Friday and were trading 0.48% higher at $331.50 in Monday's premarket session. 

Photo Credit: pjs2005 via Wikimedia