PRIMER: US Government Shutdown

• The Senate has proposed a 45-day continuing resolution (CR), without Ukraine aid.


• Some House GOP's are against any CR as it endorses high government spending.


• Capitol Insights put the chance of a shutdown at 75%. 


• A shutdown would delay key economic data, potentially having implications for the Fed.

SUMMARY: If Congress fails to agree on a continuing resolution (CR) by October 1st, the government will enter a shutdown, disrupting government services with hundreds of thousands of federal workers furloughed without pay while US economic data releases will also be delayed, potentially impacting the Fed. Senate Republican and Democratic negotiators are reportedly nearing a deal on a short-term spending measure, which includes little to no new Ukraine aid and no disaster relief in an attempt to appease House Republicans. The bill would keep the government open for 45 days, taking it to mid-November. However, some are still against it as they view it as an endorsement of high government spending. House Speaker McCarthy wants to pass four other appropriation bills beforehand, but those that include border security and spending cuts are seen as dead on arrival to the Senate and White House. Note, Capitol Insights' Greg Valliere puts the odds of a shutdown at 75%.

IMPLICATIONS

If the government were to shut down, officials have said it is likely that economic data releases will be delayed. It depends on how long the shutdown lasts, but with the September NFP jobs report due Friday 6th October, it is likely this will be released at a later date. The September CPI report is also due on 12th October, also at risk of being delayed. Depending on the new release dates, this could complicate matters for the Fed with the next meeting on November 1st, while they will be in the blackout period from the 21st of October, which could result in markets being left in the dark. 

Reuters writes for defence names (LMT, RTX, BA), any new contracts, including renewals or extensions, would not be awarded in the time frame, therefore payments to the defence names could be delayed.

On antitrust, Reuters highlights that other antitrust cases have continued through past shutdowns but it is unclear whether Google's (GOOGL) antitrust lawsuit would be disrupted. 

Meanwhile, the majority of SEC and CFTC staff would be placed on furlough, but the FDIC and OCC would continue as normal. 

26 Sep 2023 - 17:30- EquitiesEconomic Commentary- Source: Newsquawk