The US federal government shutdown is injecting “uncertainty into the economic outlook”, according to a note from S&P Global. The ratings firm suggests that while the shutdown’s impact on gross domestic product (GDP) growth is expected to be minimal, the curtailment of discretionary federal government spending and the resultant dampening of sentiments are causing economic uncertainty to rise.
S&P Global Ratings Economics has estimated that the shutdown could reduce GDP growth by 0.1 to 0.2 percentage points for each week the government remains closed. The firm’s calculations primarily account for direct costs, making this a conservative estimate, particularly when compared to declines that include indirect costs that are harder to quantify.
The firm based its estimate on the effects of previous shutdowns, mainly the reduction in hours worked by federal government employees, also broadly used as a measure of government output. S&P Global wrote that because federal employees typically receive retroactive salaries after the shutdown concludes, any lost GDP growth is usually partially recovered.
