S&P: "Economic Impact of Shutdowns Generally Limited"

Secondary Effects Could Accumulate if Prolonged...
GDP Growth May Decline

International credit rating agency Standard & Poor's (S&P) has analyzed that the economic impact of a U.S. federal government shutdown (temporary suspension of government work) would be generally limited.

AP Yonhap News

In a report released on October 1 (local time), S&P stated that the effect of a federal government shutdown on the U.S. economy is typically minimal.

However, S&P pointed out that as furloughed workers reduce their spending and delays in the release of key economic indicators increase uncertainty for the Federal Reserve, secondary effects could accumulate over time. S&P estimated that while the shutdown continues, gross domestic product (GDP) growth could decrease by 0.1 to 0.2 percentage points per week.

International credit rating agency Fitch also predicted that the shutdown is unlikely to affect the national credit rating in the near term, and analyzed that the impact on economic growth depends on the scope and duration of the shutdown. Fitch stated, "We will continue to assess developments related to the U.S. regulatory environment, rule of law, and institutional checks and balances as part of our analysis of the national credit rating." Fitch added, "Despite the possibility of a weakening in institutional checks and balances, the status of the U.S. dollar as a major reserve currency-which is a key strength for the credit rating-is expected to remain intact for the time being."

In fact, past shutdowns have generally ended within one to two weeks, so their impact on the economy has been limited. During the longest shutdown on record (35 days) from late 2018 to early 2019, the economy was temporarily negatively affected, but recovered immediately after the shutdown ended, resulting in only a minimal effect on annual growth rates.