The U.S. government shutdown probably won’t hit the economy too hard, say economists. Some point to the fact the shutdown has come right at the start of the fourth quarter, meaning there’s time before the year’s out for the economy to recoup some of lost output resulting from the downtime. But, the longer it goes on, the worse it will be.
And there is always that debt-ceiling tail risk – the worst-case scenario being that the U.S. Treasury will default on one or more of its obligations. A Reuters poll on Monday put that risk at less than 10 percent.
Here’s a selection of comments from economists on the impact of the shutdown:
Michael Feroli, chief U.S. economist, JPMorgan:
“We estimate that each week the government is shut down will shave about 0.12 percent off the quarterly annualized growth rate of real GDP. There may be additional knock-on effects through confidence and on into consumer spending which are harder to quantify, though in the last shutdown in 1995-6 these appear to have been minimal. Real consumer spending expanded at a 2.8 percent annual rate in Q4 95 and a 3.8 percent pace in Q1 96.”
John Silvia and Michael Brown, economists at Wells Fargo:
“The estimated economic effects of a short-term federal government shutdown on our current forecast are estimated to be minor. Our expectation is that our fourth quarter GDP call would be reduced by 0.0-0.5 percent in the fourth quarter. There would be negative effects on government spending and reduced consumption from the furloughed workers. Historically, following a government shutdown, the federal government boosts consumption and federal workers payroll is restored.