US Shutdown May Delay Economic Data, Leaving Fed To Rely On Existing Projections

(MENAFN- Live Mint) It has been almost seven years since the US saw its last government shutdown , a record-setting fight during Donald Trump's first term. Since then, the cycle has been familiar: political brinkmanship, eleventh-hour compromises, and markets largely shrugging it off. But this round looks different. Yahoo Finance notes the odds of a shutdown starting just after midnight on October 1 are high, and the fallout may hit harder than investors are used to.

Lawmakers look holding their ground, with President Trump and Republicans on one side. The Democrats, on the other hand, are pushing to extend healthcare subsidies to keep Obamacare-related insurance premiums in check. Neither camp seems in the mood to blink, raising the odds of a partial shutdown just after midnight on October 1.

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White House raises the stakes

Yahoo Finance reporter Ben Werschkul notes both parties see political upside in the fight. Trump at first signaled he might sit down with Democratic leaders. Then he abruptly canceled a planned White House meeting. Hours later, his administration issued a memo instructing agencies to prepare for layoffs in programs not“consistent with the President's priorities.”

That move could ripple well beyond political theater. The federal workforce has already been reduced this year as part of a broader cooling in the jobs market. A shutdown would only add pressure - and possibly deepen that slowdown.

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Federal Reserve left in the dark

The bigger problem, according to David Seif, Nomura Chief Economist, is data. If the government shutters, the Bureau of Labor Statistics would likely delay or halt the jobs report, the Consumer Price Index, and the Producer Price Index. Those are the very numbers the Federal Reserve needs to decide its next move at the end of October.

Without them, the Fed could be“flying blind” in what Nomura research analysts called a“data desert.” In practice, that means the central bank would likely stick to its existing Summary of Economic Projections.“The bar is high for the Fed to disregard its own Summary of Economic Projections (SEP) and keep rates unchanged or cut by 50bp in October,” Nomura wrote. A shutdown, they added, would“make following the SEP even more likely.”

That could calm short-term market nerves - but it also raises the odds of a nasty surprise when the numbers finally return. Investors may hold their breath for the first real data drop after the lights switch back on.

FAQsWhen would the US government shutdown begin?

The shutdown would start just after midnight on October 1 if no deal is reached.

Why could this shutdown could matter more?

Both parties appear unwilling to compromise and key data could be delayed.

What data would the Bureau of Labor Statistics halt?

The jobs report, Consumer Price Index, and Producer Price Index could be halted.

How could the shutdown affect the Federal Reserve?

It could force the Federal Reserve to set policy without updated jobs or inflation readings.

What did the White House instruct agencies to do?

It asked them to prepare for potential mass firings in programs not aligned with Trump's priorities.

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