2023-08-21 16:28:00
Goldman Sachs Group Inc. believes the U.S. economy will take a short-term hit if federal funds run out on Sept. 30 and then the government shuts down, but then recover.
“The federal government is more likely to shut down temporarily later this year,” Alec Phillips, Goldman’s chief U.S. political economist, wrote in a note to clients on Wednesday. He cited a lack of consensus in Congress over an annual spending bill for the new fiscal year, which begins in October.
A partisan battle over the budget poses a low risk of a devastating outcome like this year’s battle over raising the debt ceiling. The issue of raising the debt ceiling threatened to put the United States into default. But this “increases the likelihood that Congress will fail to act in time” on the appropriations bill, Phillips wrote.
Goldman’s economics team estimates that an entire government shutdown, including the impact on the private sector, might hurt gross domestic product (GDP) growth by 0.2 percentage points a week. The bank expects to make up for lost money in the post-closure quarter.
“The market has not reacted strongly to past government shutdowns,” Phillips said, adding that stocks ended flat or rising in 1995-96, 2013 and 2018-19. . However, he also wrote, “In each instance, within days of the shutdown, stock prices were lower than they were at the beginning.”
news-rsf-original-reference paywall">Original title:Goldman Sees GDP, Markets Weathering Likely Government Shutdown(excerpt)
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