Washington [US], October 6: The US government shutdown due to the failure of the Republican and Democratic parties to agree on a budget plan is causing economic impacts not only on this country but also on the world.
The current US federal government shutdown has yet to show any signs of improvement as the two parties continue to disagree deeply on the budget plan. Politico quoted analysts estimating that for every week the US government is shut down , the country's GDP loses $15 billion. However, the impact is not limited to that.
The Fed operates "blindly", gold prices hit a record high
The US government shutdown has caused federal agencies such as the Bureau of Labor Statistics to temporarily suspend operations. This is the agency responsible for publishing official economic data - including the US employment report and the US consumer price index (CPI) report. Therefore, the above periodic reports have been delayed. This makes it difficult for the Federal Reserve (US - Fed) because of the lack of official information to make management decisions. Meanwhile, the financial markets of the US and other countries are expecting the Fed to soon cut the operating interest rate once again.
Not only the Fed, but also corporations and financial institutions are in a state of "blindness" in making decisions. "As long as the government is shut down, we will continue to operate "blindly". But we expect that in the current economic environment, the Fed will still cut the operating interest rate further in October," Chief Economist Michael Feroli, of the JP Morgan Financial Group (USA), shared in an analysis posted on the group's website.
The US government shutdown has made investors even more concerned about the risk of instability. This is considered the key reason why the world gold price last weekend reached a record high of nearly 3,900 USD/ounce.
Not stopping there, the insecurity may spread within the US. First of all, US bonds may be affected because of concerns about prolonged instability. In addition, consumer spending accounts for 70% of economic activity, so a decline in consumer confidence can negatively affect the economy because people will limit consumption, and in the immediate future, federal employees who have lost income will become frugal.
The stinginess of federal employees is exacerbated by continued political uncertainty that has led to downsizing. More broadly, the overall employment situation in the US continues to be bleak. According to statistics, the number of new jobs in the US in August reached only 22,000. This is a record low in recent years, and the situation in previous months has not been brighter. The long-term unemployment rate is also on the rise, with more than 1.8 million people unemployed for more than 27 weeks - accounting for nearly 25% of the total unemployed. Related to this issue, jobs seem to be more difficult for new graduates. The unemployment rate after recent graduates - that is, people aged 22 - 27 - is currently 5.3%, significantly higher than the overall unemployment rate of 4.3%. When unemployment is high, the impact on the US economy is even greater.
And the butterfly effect
Not only causing internal impacts, the US government shutdown also created a butterfly effect that impacted the world economy. First of all, the gold price and financial markets as mentioned above, then the global supply chain was significantly impacted.
Specifically, the federal government shutdown has reduced staffing at customs agencies, resulting in import filing delays and shipments stuck waiting at major ports. These delays increase transportation, storage, and inventory costs, not only in the U.S. but also for global partners across the supply chain.
Regarding the issue of import and export of goods, not only customs personnel but also personnel of agencies in charge of reviewing regulations, issuing export licenses, checking food and drug safety and security clearance... are also stagnant. This also directly affects the import and export of goods.
Therefore, the longer the US government shutdown lasts, the greater the disruption will be. For businesses exporting to the US, the difficulties will be more serious amid the challenges of increased taxes. In addition, when US market consumption decreases due to the impact of the government shutdown, it will also have a strong impact on sales.
Source: Thanh Nien Newspaper
