Economic effects of the US government shutdown: A self-inflicted wound

THE US federal government shut down last Wednesday (Oct 1), after lawmakers failed to reach an agreement to extend government funding. This is the first shutdown since 2019, with economic ramifications already becoming apparent across multiple sectors of the American economy.

EY-Parthenon chief economist Gregory Daco estimates that each week of the ongoing shutdown could cost the economy US$7 billion, and reduce gross domestic product growth by 0.1 percentage point.

While short-lived shutdowns are unlikely to have broad financial impacts, economists and analysts suggest this one could be different, potentially signalling a more prolonged disruption.