As legislators in the United States continue to dither over funding levels for the upcoming fiscal year, it appears that the government is slated to shut down – and experts warn that this could have dire consequences on US markets, as well as the national and global economies.

In the event of a shutdown, it is possible that the release of vital economic information could face delays. This, in turn, will spur on a surge of volatility in financial markets, on top of a general disruption of government services.

Among the reports whose release over the next couple of weeks could be impacted by a shutdown are those for unemployment, welfare claims among the jobless, and inflation, all of which are key factors determining the direction of the Federal Reserve’s monetary policy.

The impending shutdown could also delay the release of the much-awaited Q3-2023 national payroll report, another crucial piece of information that could throw the Fed into a state of hypervigilance and caution.

A Greater Challenge

For Acadian Asset Management global macro-portfolio manager Clifton Hill, any delays in the release of economic data on the part of the government could lead to increased volatility and decreased visibility, thus posing a greater challenge to those tasked to make market / industry forecasts. 

Hill also warned that the delays would not only force investors to seek alternative sources of relevant data to make their forecasts, but it would also influence the Fed’s decisions regarding rate hikes over the next several months.

Aside from delays in the release of critical information, a representative from ratings firm Moody’s also  warned that a shutdown will adversely impact the US’ credit rating. This essentially adds insult to injury, coming  just a month after Fitch downgraded the country’s credit rating when Congress came to an impasse regarding the government’s debt ceiling.