The U.S. federal government shutdown could last a record "five or six weeks," Moody's Analytics chief economist Mark Zandi warned on the Inside Economics YouTube podcast. Without a broad agreement on funding, the shutdown will continue until key services start to fail, he said. "If it lasts more than a month - then an agreement is inevitable. Something is bound to break," Zandi said.

What could be the consequences?

Another Moody's economist, Brendan LaCerda, warned that the consequences of a U.S. government shutdown could quickly become dire, Benzinga reports. He said the short-lived shutdown has minimal impact, but "after a month, the situation could develop in a non-linear fashion and take a nasty turn very quickly."

LaSerda cited disruptions to federal contractors, delays in welfare payments and a sharp drop in consumer and investor confidence among the possible consequences.

The political stalemate in the US has already led to a de facto "information blackout" - the publication of key economic data has been suspended, Benzinga notes. As a result, the US Federal Reserve, preparing for its meeting in late October, remains "in the dark" without official reports on employment and inflation, which usually serve as benchmarks when making a rate decision.

Context

The U.S. has had its fair share of shutdowns in recent years, but only a few have lasted longer than a week, UBS noted earlier. Short-term government shutdowns have little impact on the economy and markets, the bank said. The longest such pause occurred at the turn of 2018-2019, when the shutdown lasted 34 days and the S&P 500 index lost more than 7% in the week before the shutdown and more than 8% in two weeks, with bond yields down 9%. However, other factors - duties and Fed policy tightening - added to the pressure at the time, UBS emphasized. After the end of the crisis, the markets quickly went up, the bank's analysts recalled.

This article was AI-translated and verified by a human editor

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